Well tomorrow is the end of the ignominious “Cash For Clunkers” – an unmitigated flop in my book.
It sold some new cars – no question about this, and that helped some dealers move inventory.
Selling cars was never the real goal as I see it. It was just another way for government to interfere with the market and gain more control over people’s lives. It created some temporary jobs, but we’ll get back to that one.
Here’s what went wrong.
First, the market was manipulated so that people who may have wanted a new car in the next 3-4 years were pulled out of the market and sold a new car now. What happens to that evaporated demand? What about people who were enticed into buying a new car who weren’t capable of it financially?
Second, perfectly good cars – in many cases – were permanently destroyed when there were many people in this country that would love to have bought an upgraded car or a second car. There were people that needed inexpensive transportation that weren’t allowed to get it and will have difficulty in the future because a large part of the supply of those cars is gone.
Third, the dealers are still waiting for their money from the government because they had to advance it for the $4,500 discounts. My guess is that many will never be paid, and they are prohibited from repossessing the cars that they were required to deliver as well.
Fourth, the jobs. Jobs were artificially created to manage a made-up, unnecessary program. Dealers had to hire people just to fill out the government-required applications on each purchase. Then many applications are kicked back to the dealer for more work. Additionally, people had to pour the glass into the motors to disable them and get the cars ready for the graveyard.
To paraphrase Shakespeare, this was a case of way to much to do about nothing. It also was a huge blow to free enterprise.
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© Steve Hoffacker, 2009. All Rights Reserved.
Steve - I suppose the thing that bothered me the most--although the whole concept was wrong--is that we destroyed perfectly good automobiles--cars that could have been recycled--under the pretense of helping the environment. The environmental damage done by the destruction far outweighs any improvement in mileage or less pollution.
Steve, I could not have penned my thoughts any better. You are spot on with this. While the $8,000 First Time Home Buyers incentive may not be the same, I see many similiarities. I think we will see come the first of the year whether that program did anything to assist the Real Estate market.
Welcome back the reality of the car market. I hope something similar doesn't happen when the $8000 tax credit expires for the real estate market on December 1.
Paul,
I think they did quite well, but again this was never the point. :)
Steve
John,
Amen and amen. Very good summation of additional issues. :)
Steve
Tim and Pam,
Thank you for your agreement. Most government programs are ill-conceived and administered even worse. :)
Steve
Rob,
The tax credit is fine as a credit - though not particularly effective on the front end - but when it gets monetized the issues are going to be there. :)
Steve
In the next 1-2 months I expect to see stories of dealers that are laying people off because they haven't been reimbursed from the program. That's going to put further stress on an already fragile labor market and economy.
Steve, sour grapes sure are a bitter pill to swallow aren't they? Another Obama program a resounding success!
Steve - you forgot that the government did not staff or resource the program enough to meet the demand (you know, the same government that wants to manage our health care!). Then, they had to add 1100 jobs to handle the paperwork, which is still not being processed in a timely manner. Yes, if you call spending $3 billion dollars in a few weeks success, then it was a success. However, if you look at as an example of how efficient a government run operation is, it is an abject failure. And yes, what will they do in 4 - 6 months time when those future sales that they borrowed from don't occur?
And how many dealers will this end up putting out of business? Remember, many pulled out of the program early because they can't afford to wait weeks, and possibly month or much more, for payments that were promised within 10 days.
I do believe, on the no repossession, that it only applies to those cares that they gave the rebate on but the government says they are not eligible, they cannot go after the buyer for the amount of the rebate of to repossess. However, if the buyer does not keep up payments, the dealers can still reposses.
They end up buying a car maker and then incentivizing their investment for what? To create more unioin jobs? This is an absolute farce. And these people want to run our health care! We can't run or they'll achieve what they want - taking over our country. We must stay the course and keep the United States of America as it should be ... free.
I agree, how many single moms, abused spouses, you Americans could have used those cars so they could get a better job or a even a job. I would have loved the government give those to those people for period of six months or a year so they could get back on their feet.
And so the carmakers hired back assembly workers? What happens when they aren't selling cars as fast next week?
We'll see what a success it was when payment time comes around. I can't help but wonder how many of these new car owners can actually afford them.
Steve, This program has ben the biggest success since Amtrack
Just a more subtle way of sending more money to the auto unions. Where are the opponents of "corporate welfare" in the past 9 months?
John,
That or maybe they'll just close which is what the administration tried to do before. :)
Steve
Terry,
I have no idea what you're talking about. :)
Steve
Mike,
I still maintain the goal was never to sell cars, but it has wasted so much money. :)
Steve
Jim,
Well said. Let the government do what the Constitution allows and that's it. :)
Steve
Todd,
This was only a feel good program from the start. It had flop written all over it. :)
Steve
Lane,
Well then we'll just have to give them more money. :)
Steve
Bob,
Many of these people were charmed by their government into buying something they couldn't afford or didn't need. :)
Steve
Hugh,
Unnecessary, expensive, high overhead, wasteform, harmful to the environment. :)
Steve
Jon,
Agreed. Anyway to get money to those unions and large corporations. :)
Steve