Cash For Clunkers
Wildly successful program leaves right wingers seething
August 23rd 2009
The $3 billion “Cash for Clunkers” program ends tomorrow, and it ends as a remarkable success story. In a few short weeks, it resulted in approximately 457,000 trade ins, which it's estimated will save 216-311 million gallons of fuel a year, with similar reductions in pollution and CO2 emissions. There will also be fewer accidents, injuries and fatalities, since newer cars are safer than older cars.
Naturally, the right wing is furious.
It's bad enough that any government program could possibly work. That, by itself is anathema. When the program was first proposed, right wingers groused that such a promotion should be left to the private sector. As I'm sure you know, no used car dealer has ever offered sale prices, rebates, zero-interest loans or trade-in credits in order to attract business. Never. All those “I'll stand on my head to make you a deal” ads are a product of your imagination. There are numbers. You can look them up.
It was a trickle up program, which meant money went to the middle class, who promptly went out and spent it. Republicans firmly believe the rich should be making all the financial decisions on behalf of the not-rich, and don't like it when anyone steps in and gives those surly ingrates a financial stake.
So Republicans grumped that the billion dollars forecast to be spent over the next six months was a complete waste of taxpayer money, and put the program on their list of Obama failures for use in the next election. And, briefly, forgot about the relatively minor program.
In fairness, the Obama administration had no idea how successful the program was going to be. That's why they only budgeted one billion, and assumed it would take many months to use that up, in hopes that it would add 150,000 trade-ins to a market that was all but paralyzed. Even that modest goal was considered a significant boost.
Americans like cars. If you've had occasion to notice one of the 135 million or so cars around America, then you know that Americans like cars, and the newer and showier the better. In retrospect, it's hard to imagine that the program wouldn't get a lot of attention.
Word wildfired, and the program managers, to their amazement, found that the funds for the program had been been depleted, not in six months, but two weeks. They promptly notified Congress, and Democrats, realizing they had a hot property, allocated another two billion. The last of that is expected to be used up this weekend.
For right wingers, this is a disaster. Their vision of a vibrant economy involves millionaires in limousines tossing bright shiny dimes to street urchins. The people who own the GOP ride in the limos, and the voter base hope to raise the urchins who are catching the dimes. It's the American dream.
But they can't let the success of the program stand, because that challenges all their beliefs about matters economic and political. So they've come up with an amazing list of objections.
First and foremost, there was the money. $3 billion is a gigantic sum of money, and the poor, struggling taxpayer has more pressing problems (like getting the clunker fixed) to worry about than subsidizing trade-ins.
Then there was the small scale of the program. Why, 457,000 cars is a drop in the bucket! Over 13,000,000 cars are traded in, junked, sold and fourth- and fifth- handed every year. Saving 216 million gallons a year means nothing when over 168 million gallons a DAY are used! Obviously the program was just economic tokenism! Missing from these complaints was the common sense observation that the program was only as large as its funding.
The elitists of the GOP were outraged that only 0.15% of the population would directly benefit from the program. When the GOP opposes luxury taxes on yachts and inheritance taxes on $3 million estates, they aren't looking out for the welfare of a tiny minority—they have everyone's welfare at heart!
So they weren't amused when it was noted that everyone benefited from lower demand for gasoline (which, in theory, should lower prices) and cleaner air. They sneered that the program was too small to matter. As if the luxury tax did.
Another complaint was that the money all went to Japan. The biggest single beneficiary was Toyota, which makes its cars in the well-known Japanese prefecture of Kentucky. Ford was a close second, although most of the Fords were made in Canada, which, it must be admitted, is not part of Japan. GM also benefited, enough so that they hired back 500 workers last week, the first sign of like in quite a while from that moribund company.
Another whine went, “Cash for clunkers cost triple what was budgeted and will end two months early. Only dumbass libs could consider it successful.” I could just imagine this particular captain of industry deciding not to carry a product in his store because it kept selling out and he had to keep putting in special orders so he could have some in stock. The wild success was a clear sign of failure.
One complaint did have some validity: “In the meantime it put thousands of citizens back into debt.” Yes, it probably did. But until business owners recognize that the ONLY way to get more money into the hands of consumers will be by paying the employees better, that's the only option for having money at hand to buy a car. Businesses have three choices: extend credit, put money in the hands of consumers by paying employees better, or go out of business. By far, the best option is the second.
Another complaint was that it took energy and caused pollution just to make the new cars, and to scrap the old cars. One guy came up with a long list of fuel consumed for each step of taking a clunker and transporting it to a wrecking yard and scrapping it, but sort of blew his own argument out of the water by claiming that they had to be scrapped on location. In reality, the program has a detailed program for salvaging and recycling the cars that have been turned in. I'm told, but can't confirm, that GM already put a bid in for all the recycled steel expected from the car remains that get crushed.
Another guy claimed that the program all but destroyed the used car market by taking all the used cars off the market. As noted, about 13 million cars are resold each year, so there is a gap of less than 4% in that market for this year. It's unlikely to create such a shortage that, as this one guy claimed, used cars might end up costing more than new cars. Worse, it would eliminate “choice” in the used car market, since the shortage would be mostly among inefficient, pollution-belching monsters, which is what every poor family wants.
One of the more disingenuous arguments Republicans used against the luxury tax was that it impacted the livelihoods of people who sold luxury yachts. It was a questionable assumption in any event, since anyone who can afford a 60' yacht isn't going to worry about a 10% tax. But the scale made the assumption ridiculous. There are perhaps two dozen new yacht dealers in the entire country.
It was the Republican way of humanizing the rich man's tragedy. Don't feel sorry for the billionaires—feel sorry for the servants!
They are trying the same gambit now. Now that the program has sucked all the air out of the used car market (well, 4% of the air, anyway), used car dealers will begin dropping like flies. One guy made the claim the dealers were being stiffed by the government on the rebates, buttressing it with the even stranger claim that dealers financed their sales based on FIVE-DAY notes from the bank. Five day loans are usually only seen on the Sopranos and at paycheck cashing places. It's one of the more nonsensical claims made.
Finally, there's those poor auto mechanics. Now that all the clunkers are gone (at least 4% of this year's crop), auto mechanics will be dropping like flies. New cars are less expensive to run than old cars, and never mind that it benefits the people who own the cars—think of poor old Bert the mechanic, struggling to live on $85 an hour and having to rely on the 100,000,000+ clunkers on the road that haven't shuddered and died yet. Poor Bert. Maybe the Republicans will propose a government program to help him. Assuming, of course, that Bert isn't in the working class. Maybe Senator Ensign can come up with a “Jesus For Clunkers” program whereby the GOP will offer tax rebates to churches willing to mention Republican cars in their weekly service prayers.
In the meantime, the program worked.
And the GOP is livid and a bit panicked about that.
NOTE: Every so often, I get a response that takes issue with some or all of an essay that it demands respectful attention. The fellow who runs the ToppleBush website wrote such a response, and I'm pleased to add it on in order to broaden the view of the Cash for Clunkers program:
Hi Zepp, As a partaker of this program who got three others to do the same, I felt I could comment on this program. We agree that it succeeded beyond everyone's expectations but not if you had been paying attention to how well this same program worked in Germany and the UK. Germany allocated $7bn to their cash for clunkers program. If you recall the Dems wanted $4bn for this program but gave into the GOP to pass the budget bill and chopped off $3bn - two of which they added back after the first #1bn ran out so quickly. So they still didn't fund this program as much as it should have been. Also initially at least there were way too many problems in how this program was being run and administered. No one seemed to know what was required of them. Even now dealers are waiting on their government rebate checks and many stopped selling cars under this program early because they weren't sure they would be paid. AutoNation stopped selling cars under C4C last Friday. Some dealers in fact are having trouble paying bills because they are waiting for their rebate checks. Transportation is suppose to be speeding up the processing of dealer rebates having hired a lot more people so these problems should eventually be taken care of soon. Also many of these problems were the result of forms not being processed with all of the information required. Also because of the way it was handled and run, both GM and Chrysler didn't have enough cars to sell that qualified because of having shut down production during bankruptcy which put them at a disadvantage to Toyota and Honda, etc. who didn't have the same problems. So I sort of wish this program had started with a more level playing field. You are absolutely correct about all of the people who benefited from this program all down the chain including banks lending money - from reports I read, most buyers of cars under C4C were well qualified so these loan were good loans. Also even buyers without cars that qualified for gov't rebates were buying cars because they were drawn into the showrooms. You are correct that lots of car parts should be salvageable. But not the most expensive part - the engine. In many cases it was costing more to scrap the cars than they were worth as scrap. But there was another huge benefit you didn't mention. State governments had to have seen their tax revenues go way up during this time because of all of the sales tax, license fees and registration money they were collecting. Also more money went to companies and businesses writing car insurance too. And GM hired at least 1500 more people at one plant and Chrysler is adding more hours to production. I am not sure how much money would have been enough but certainly $3bn was not enough. It would be my wishes that the government would consider doing this again but maybe early next year if still needed. I would give the Dems lots of kudos for undertaking this program but not for how well they ran it. Almost every aspect of how they ran it was badly mismanaged, although some of this was not entirely their fault. RJ