The Pending Cash for Clunkers Program: Failure From the Get-Go?

Posted: June 21st, 2009 by Militant Libertarian

by Aaron Turpen,

The much-argued “Cash for Clunkers” program will become law soon enough. The House and Senate have agreed on wording and terms and where to put the bill to get it passed and signed by President Obama.

There are a few things to note about this bill and the surrounding controversies:
Much argument was given over funding, which settled at $1 billion.

To fund and pass the bill, Congress had to stuff it into the war spending bill (for Afghanistan and Iraq).

The total funding is barely 1/4 of the total estimated costs for this program.
The program is not likely to start until close to the end of the fiscal year (September 30).

These points are significant for several reasons, not the least of which is the apparent sneakiness going on to push the bill through. The Senate’s major concern (in debate) was the payouts for these trade-in vouchers. They wanted higher mileage requirements and less money being paid.

In the House, the debate was mainly just how they could frame the bill so that it would pass the Senate. It takes fewer votes in the 100-member Senate to make a bill into scrap paper, after all. This bill was controversial from the beginning anyway.

The bill works pretty simply, but looks pretty easy to take advantage of too. The trade-in must have mileage numbers (mpg) at 18mpg or less (combined city/highway) and the new car being purchased must have at least four miles better than that to get a $3,500 voucher. If the new car gets at least 10mpg higher than the trade-in, the voucher will be for $4,500.

Trucks are figured differently, with the replacement vehicle required to have at least 18mpg combined. That’s not actually hard to achieve today, with the average pickup truck (in medium and heavy duty classes) getting closer to 20mpg. The new vehicle only has to get 2mpg better than its trade-in counterpart, however. A big concession to Detroit, it appears.

So a pickup truck that gets 15 city/19 highway will have a combined mileage of 17mpg. This truck, if traded in for a heavy duty Ford diesel (21mpg combined) would be eligible for a $3,500 voucher towards that new truck. If a dream were to come true and that pickup were traded for a Honda Insight (fat chance), the voucher would be for $4,500–which is about 1/4 of the Insight’s price tag.

Little heed was ultimately given to the two major concerns I have with this bill: a similar one in Europe (esp. Germany) proved to be disastrous in both budget and outcome and where does this money come from, exactly?

The first question involves how this bill will help car sales, if at all, and whether it is really doing anything to improve things environmentally or otherwise. In Europe, for example, vehicles that would otherwise have been scrapped regardless were turned in under the government’s program because there is a huge difference between scrap price for a vehicle ($50 average) and a $3,500+ voucher.

This disparity hurt scrap yards and the industry, since the scrapped vehicles didn’t necessarily go to local scrappers and none of them ended up in the wrecking yard to be sold off as spare parts. Not only that, but many of the purchasers were going to buy a car anyway, so the number of cars sold was not boosted nearly as much as was predicted with the law’s passage.

To further complicate things, analysts are predicting that a further slump will hit many European auto companies next year because the law may have enticed new buyers this year that would have otherwise waited until next.

Overall, no one who was not in the market to purchase a car inside the next 12 months seemed to be enticed into doing so because of the bill. At least not in any numbers of note.

The scheme in Germany has gone over budget by millions and may be closed down due to the unforseen costs associated with the bill outside of the vouchers themselves.

The really big question here, for me at least, is why, exactly, did America so desperately need this bill? If car buyers were going to buy anyway, if the cars being traded in were going to get scrapped regardless, and if new versus old is already at the bill’s listed efficiency numbers… what, exactly, is being gained here?
In my mind, nothing but improved government wastefulness, a lot of wasted money, and some fake green cred to the bill’s major supporters.

All I see is wasted time, effort, money, and hot air from the morons in Washington. In other words: business as usual in D.C.

Got comments? Email me, dammit!
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