Cash for Clunkers Revisited

Posted by Larry Miller on August 2, 2009 under Why | Be the First to Comment

Above: Destroying a perfectly good car on government orders.

When the Cash for Clunkers plan was first announced, it appeared to be a flawed plan right from the start. There were some obvious problems with the scheme to get people into more politically correct green friendly cars. With the plan only a few days into operation, the plan has successfully seduced so many more people to trade in there bigger, safer cars to snag their share of taxpayer or Chinese money that the initial billion dollars has already swirled down the drain. The government is busy patting itself on the back and proclaiming the program a total success. But is it?

According to a recent Rasmussen poll, 54% of the voting public was against the plan while 35% favored it. Among those with a little more financial interest, 62% of investors thought it should not be done… and an even 50% of all respondents felt that if they were going to run a program like this, it should be restricted to American made cars. However, like so many programs coming out of our nations’ capitol… bailouts, health care and all sorts of things we haven’t even been told about, the desires of the people… as in “We the People”… have been ignored in favor of elitist programs and schemes to involve the government in more areas of our lives.

Let’s look at what really took place in our country. Thousands of buyers have happily driven away from lots in their shiny new or late model cars, with salesmen and women tallying their skyrocketing commissions and dealers themselves hoping they were going to see the promised money. The scenario fits perfectly the thinking of the current administration… transferring dollars to supposedly disadvantaged or favored and adding burdens to evil business owners.

Several dynamics were at work in each transaction… let’s look at them.

The most obvious action was people who may have been thinking of replacing their current mode of transportation for a new one saw the incentive of having their fellow citizens chip in to help pay for their car. Often, these were people who could already afford a car and perhaps were planning to buy one in the next year or two. This program just compressed the process. I guess it goes back to the definition of fairness promoted by many in our government for many years… that someone else pays for my benefit. It’s human nature… and not the nicest side of it.

However the they are not home free with no down side. In many cases, people have traded in a functioning automobile that carried no payments for another, probably better car, with significant payments. In other cases, some who could not quite swing the deal for the car found a way, with the incentive, to squeeze it into their budget. At a time when people are trying to cut down on their debts, these buyers have been convinced to join the federal government in increasing their monthly expenses in spite of increasingly insecure employment situations. We saw what happened when easy terms and low interest rates drew more and more people into the housing market who should not have been there… to the detriment of the themselves, lenders and our country in general. One has to wonder if this is just a repeat of a foolish strategy that may drive us into even more negative circumstances.

The salesmen are loving the increase in sales at car lots that have been devoid of customers for months. Customers have been waiting in line just to talk to one of these purveys of economical transportation. Assuredly, they will see some massive checks, but at what cost? Customers may have bought their new car next month, or a few months down the road, even into the next year. So we see a spike in sales this week at the cost of many future sales that would have given them a steady income over the months to come.

The dealers are seeing cars roll off their lots in, sometimes, record numbers. They have been told to sell the car, fill out the 1040 type forms, and wait for their payments… if they are approved. Already reports are coming in that submissions are being rejected… meaning the dealer is not getting the money. With hundreds of thousands of cars on the streets through this program combined with the efficiency and effectiveness of the government in getting payments out the door… this could conceivably be responsible for closing more dealers than the auto companies themselves as, essentially, the dealers have to pay off new cars coming out of their floor plan, pay commissions to salesmen and cover a variety of costs of doing business. The more successful they are, the more they are depending on the government to keep its word in a timely manner.

The cars themselves show the desire of the administration to destroy anything they just don’t like. They’re not all junkers… some are decent transportation for someone without a lot of money, yet, but terms of the agreement, they must be destroyed withing a few days… long before any payments will be received from our Big Brother in Washington. They cannot even be sent to junk yards for salvage, but are destined to be crushed and melted down. So strong is their desire to remove these politically incorrect vehicles from the streets, our “benefactors” don’t have any concern for the less financially well off they claim to want to help by shrinking the supply of inexpensive vehicles.

The administration, and even some Republicans who should know better, are touting the plan as a massive success, to the point of looking for an additional two billion dollars from the American people beyond the initial one billion allocated to the plan. All one can do is only look back at one of the gravely voiced Everett Dirksen’s favorite quotes, “A billion here, a billion there, and pretty soon you’re talking about real money.” Unfortunately, the damage goes far beyond the dollars down the drain.