Cash for Clunkers blows through $1 billion in 1 week

July 31, 2009

The subsidy for the auto sector cloaked as an environmental program has already run through its budget.  (WaPo):

“The program started only six days ago, giving vouchers to consumers who trade in their gas-guzzling cars for more fuel-efficient models. But the unexpectedly brisk response made federal transportation officials increasingly fearful Thursday that they would exhaust their [$1 billion of] allocated funds….”

Dealers are in the press touting the program’s “success.”  Of course it’s successful for them, they get to clear their inventory.  But the program represents a net cost to society: the money borrowed to fund it plus interest.  Since, at the rate we’re going, the debt will have to be rolled over in perpetuity, we’re talking a lot of interest.

By the way, I suspect CfC is a net negative for the environment too.  The MPG requirements—anything below 18 MPG traded in for anything over 22 MPG qualifies for the tax credit—are silly.  And the energy consumed to produce the new cars offsets any savings from a few extra MPG.

The Obama administration wants to suspend the program because it has promised to corral the deficit.  But congressmen want to keep funneling cash to the dealers in their district, a portion of which will no doubt end up in campaign coffers.  They are even talking to the administration about recycling TARP funds.

How much money are we willing to spend subsidizing the auto industry?  Already GM and Chrysler have received tens of billions that are never coming back.  Now Congress wants to spend $1 billion more per week?  Where does the spending insanity stop?

Please Mr. President, make it go away.


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The pols are just buying time until the next big military ramp up where the DoD contracts out for under-equipped SUVs from Ford, GM, and Chrysler. Then the Detroit 3 can sell their military subsidiaries and “payback” the taxpayers w/ the proceeds and claim we earned a profit on our investment. Just like they did w/ Chrysler in the ’80s.

Posted by million | Report as abusive

Would someone please ask: which dealers (domestic or other) are getting most of the action on the clunkers program: GM, Ford, Toyota, Lexus, ?? What kind of vehicles are being bought: trucks, hybrids, SUVs, etc. by percentage? And
then what: cost of scrapping the clunkers versus 3 MPG savings…which you have already mentioned.

Posted by Clair Villano | Report as abusive

This is EXACTLY what happened with exactly the same program in Germany. Which is smarter – give billions to manufacturers with no immediate short term results and likely no long term results — or put the money back in the hands of consumers NOW and get the whole economic system moving NOW. The FACT is, as in Germany, it provides a REAL stimulus to the economy by putting money BACK INTO the consumers hands. On a macro scale, the government should send every taxpayer a $10,000 tax-rebate check to REALLY stimulate the economy and forget bailing out the old boys club on Wall Street. This program proves stimulus works from the BOTTOM UP, not from the top down.

Posted by Ima B Leaver | Report as abusive

To Ima….I agree that this is a successful way to spur consumer demand. I disagree that it is good policy. Pulling future demand into the present using borrowed money is a recipe for stagnation/collapse later on when borrowed funds are no longer available. Yeah, we may be able to increase borrowing for some time yet, but in so doing we risk a far more spectacular crash later on.

It would be preferable to let the market do what it wants to do with the car industry: shrink it!

And is this such a bad thing long-term? Do American families need 2-3 cars each? Of course not. And by the way, it’s terrible for the environment.

Posted by Rolfe Winkler | Report as abusive

Mail me a $10,000 check and I’ll just use it to pay off my car note. I’d bet many others would use it to pay off/down credit cards, second mortgages, etc.

That’s probably not the quick stimulus you’re wanting.

I got a chuckle out of the car dealer you said that if the gov’t can’t properly administer a program like this he’s not sure he wants it running health care.

Posted by Andrew | Report as abusive

Know what kills me the most about this? In 4 months we will be reading the auto industry has recovered because 3rd quarter sales are up 1000%!!!! There will be no mention about this program though, and that sales will return to dismal levels after the program ends. Which is exactly what the government propoganda is right now due to stimulus funds. How does giving away free cars stimulate the economy?

Free money does not solve the problem!! It’s a temorary upswing. But according to the Obama lovin press, everything is great cuz GDP only decreased by 1%. When did “things are as bad as we thought” become good news??

Posted by Steveo | Report as abusive

I didn’t think I’d live to see our first black president. I didn’t think I’d live to se the demise of the USA as an economic power.

Posted by Ron | Report as abusive

While Uncle Sam is providing a $1 billion handout to the new-car industry, the suckers–er, I mean the buyers of the new cars are no doubt signing up for about twice that much in anybody-with-a-pulse loans and leases which the big banks are gleefully packaging into yet another round of sleazeball derivatives.

Posted by ArtFart | Report as abusive

Wrote the WH, my senator and congressman. What a joke. Usually I’m more articulate, but this one just baffles me.

Posted by AMcKay | Report as abusive

How about the government giving me money to keep my car that gets better fuel mileage than most everything new out there.

Its descriminating against those people that purchase the right car to begin with.

The government was short sighted for sure in what this would do for our economy. If there was 16 million new cars sales last year and it went down to estimated 10 million new units this year how is $1 billion going to help the manufactures if it only help move 250,000 new vehicles.

Plus 2 of the US manufactures had shut down plants to reduce cost and those dealerships are short on inventory while the import manufactures kept building and reaped the benifits of this program.

Check you local papers and see what they are reporting. See how the import dealers have out sold the domestics. In our city the Toyota dealer has over 30 clunker deals and GM, Ford, Chrysler (whoops no Chrysler dealer here anymore) have but a few deals out.

The government doesn’t know where or how to use our tax dollars. Never has never will!!!

Posted by Adam | Report as abusive

The whole U.S. economy’s a clunker. Obama was supposed to have taken that total rustbucket off the road and traded it in for an entirely new one months ago. Besides ending the war and prosecuting the criminals behind it, that’s what he was elected to do.

Now the thing’s in the ditch, in the middle of economic night, with nary an honest mechanic in sight.

Good luck finding your way home, Obama.

Posted by The Bell | Report as abusive

The government has learned that they can stop the domestic auto industry’s bleeding by simply shoving money into the wound. Problem is, the wound keeps getting bigger. How long will our government pursue this foolish, unsophisticated, and ultimately dangerous solution?

Posted by Matthew L. | Report as abusive

I’m amazed at this……’s so very wrong on many fronts….let the markets correct by themselves and stop printing all this fake paper (so called money) to bail everyone out…….the markets need to heal on their own!!!……here we are subsidizing the car manufacturer’s that are already being subsidized big time by us tax payers…….this is totally outrageous and nothing but a stupid little bandaid on a massive wound…

Posted by Mr. Anderson | Report as abusive

Looks like the dealers are none too happy w/the clunker program either. They’re screaming about the paper work. I’ve been looking for a new car (actually from before the clunker thing came out – I just take a while), and a saleslady commented to me yesterday that it took her over 4 hours of pc time to get the pwork submitted and accepted. That’s not gonna fly for long w/anyone, so maybe it’ll shoot itself in the foot?

Posted by CyberSquirt | Report as abusive

They must be allowed to fail. GM and Chrysler can’t ever get the stink off them now. Ford is the only one that deserves to come out of this due to reasonable management. It’s over for the big 3, the sooner we realize that and force government to stop the bleeding the better. Nobody wanted this, but let’s deal with it….seriously.

Posted by Sean | Report as abusive

There has so far been on average a 61% increase in MPG for people who participated with this program. That is significant and that is a good thing for the environment and national security no matter how Mr. Winkler wants to twist it.

Mr. Winkler seems to think that people are trading in brand new cars for more brand new cars when he touts the “net negative” impact of the program on the environment. These are not brand new cars and all cars are eventually retired. I suppose we should have kept all the coal fire factories that belched soot into our cities during the industrial revolution, because replacing them was a “net negative” for our environment. Imagine the clean environment we would have had if only Mr. Winkler was around to warn us of the folly of replacing those factories.

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