Our View
A billion gone and clunking
According to the Wall Street Journal, Adam Lee, of Lee Auto Group in Maine, says his dealerships have struck 100 deals under the new "Cash for Clunkers" program, which offers a maximum incentive of $4,500 toward a new car, if you trade an older and inefficient car to be junked.
For doing 100 deals, Lee told the Journal, he's waiting for $450,000 from the federal government, which has yet to be disbursed. We're confident he'll get his money. Lee has fulfilled his end of this crackpot bargain that Congress has created. So have many dealers across the country.
So much so, in fact, that the $1 billion appropriated for "Cash for Clunkers" was sucked dry in days, forcing the House on Friday to approve an additional $2 billion to keep the program going.
Somebody, please stop the insanity.
Cash for Clunkers is working as an incentive to buy cars — and amazingly so. But this doesn't stop the policy from being fatally flawed, by persuading people of probably limited means — hence the owning and driving of clunkers — to purchase new, expensive vehicles through the assumption of debt.
The program's incredible activity, though, has underscored another flaw, this one economic. The government has now spent $1 billion in taxpayer dollars to purchase junk cars, up to $4,500 each, despite the value of these cars being collectively, and greatly, far less than the incentive.
And now, the government is poised to spend $2 billion more, to buy more cars that are worth about nothing — they're being junked, after all — for $4,500. This is lunacy.
Maine's congressional delegation, which voted for Friday's additional clunker funds, is fawning over the program's swift utilization as evidence of its value to, in the words of Rep. Mike Michaud, "help families afford the purchase of a new fuel-efficient vehicle" and sustain manufacturing jobs.
Maybe. Or maybe the program is an astounding success because taxpayers are being played for suckers. There is surprise that a government program offering 10 times the value for an old inefficient vehicle is a rousing success? We've written before that there are no car dealers in Washington. Apparently, there are no business people either.
(One note on promoting fuel-efficient vehicles: the market for them was robust even without cash for clunkers. Did we really spend a billion dollars to get people to buy cars they were buying anyway?)
The Senate should not allow the next $2 billion to be spent. The taxpayers have been bled enough to buy worthless assets. We already own all of the country's toxic mortgages. We already own the rancid, unprofitable parts of General Motors. We've spent billions on things when nobody else was offering a nickel.
And now, taxpayers should spend another $2 billion on junk cars? Please, enough is enough. One billion dollars are gone and this program is still a clunker. Let's rebuild the American automotive industry and its dealer network on solid footing, not on expensive, nonsense gimmicks.
No more money for cash for clunkers. These prices are insane.
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It's amazing the lack of
It's amazing the lack of understanding of a program such as this. Take the example cited in the destruction of the engines. The cars could simply be crushed. However, the dealer in question apparently wants to salvage the rest of the parts off the car so they can be resold thus not only taking his $4500 from the government, but making more on the side with NO investment on his part. The process selected by the dealer is his choice, not mandated by the government. Further, it makes no sense to resell these cars since THAT DEFEATS THE PURPOSE OF THE PROGRAM. Besides stimulating the sale of new cars, the idea is to get inefficient cars OFF THE ROAD. Turning around and reselling them only perpetuates that part of the problem.
Secondly, the fact that the program ran out of money so quickly is NOT an indication of failure-it is an indication that the program did what it was intended to do, albeit more quickly than anticipated. How is that a BAD thing? Oh yeah, because Obama thought of it rather than Palin!
As for people of limited means buying something they can't afford, that's for the lenders to monitor. The SAME RULES APPLY to cars purchased through this program as any other purchase.
Bottom line is that the naysayers once again rely on distorted facts to make their points in trying to disparage an innovative program that is attempting to do something. I find that at least the attempts to stimulate the economy are a better alternative than the other side's head-in-the-sand policies of denying there's a problem and choosing to do nothing. Didn't they get the hint when they were voted out of office?
If there is a question on
If there is a question on how some will pay for the cars, what about the increased excise tax and the increase in insurance costs? Wait a little while, we'll see alot of these vehicles on used car lots.
This government program has
This government program has to be a record setter for failure. It was out of money before it hardly got started. How many people are going to buy new cars they can't afford? How many cars that are safe, decent transportation are going to be destroyed? Maine tried the same type of program, guess what, ran out of money. Maine tried a health insurance program, guess what, ran out of money. "As Maine goes, so goes the nation". Oh no, not again. The Feds can't run Social Security, Medicare, Medicad, or the Postal Service, why put them in charge of a Health Care Insurance Program? If the Feds could stick to the people social programs instead of their EARMARKS vote getting programs we might stand a chance of survival.
verified This is a pretty simple
This is a pretty simple Federal program...and a disaster.
It requires the dealers to destroy the engine. From a New York Times article:
The program requires that the clunkers be put out of service for good, so dealers must destroy the engines on cars that are traded in. We watched this process yesterday at the DCH Paramus Honda in Paramus, N.J. It is quite laborious and potentially dangerous. And it certainly is final.
Nick Clites, who is in charge of used cars for the dealership, was prepping a 1988 BMW 535IS, with 214,000 miles on the odometer, for its death. He drained the oil, then donned a silky blue protective suit, goggles and gloves and poured a sodium silicate solution into the engine. He revved the car, and within a few seconds, the solution hardened into a glass-like substance, the engine seized up and the car was dead.
http://thelede.blogs.nytimes.com/2009/07/31/dealers-race-to-get-their-cl...
Why not sell these "clunkers" to people who might be able to get a little more use out of them?
If they run a scrappage program like this, imagine health care.
Summarizing the symptoms emblematic of the smartest Presidential Administration in our lifetime:
1) Capital destruction
2) destruction of a commercial market
3) destruction of asset value
4) “The Europeans do it so it must be good!”; I’d wager that the Europeans only do it for cars made on the continent
5) over management, micro-management: the forms for executing one deal run to twenty pages
6) general mis-management
Next up: Health Care Management for All!! What could go wrong? They mean well.
The prices are insane ???
The prices are insane ??? Drive a clunker thats bad on gas for a few weeks then lets here what youve got to say! Hows the gas mileage in your nice efficent car !!The program may help some of your miinium wage personnel !!
The prices are insane ???
The prices are insane ??? Drive a clunker thats bad on gas for a few weeks then lets here what youve got to say! Hows the gas mileage in your nice efficent car !!The program may help some of your miinium wage personnel !!
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