Cash for Clunkers reality check: Why 2 MPG is a good thing

I’ve always had a problem with Cash4Clunkers. To me it seems to go against simple supply and demand economics. How can we push all of these new cars into a market already saturated with used and repossessed vehicles (see http://www.repofinder.com)? Now new cars are worth even less, we have more Amerians in debt, and eventually more repossessions.

Arron, I still say CFC was terribly abused. At first it was supposed to be an 8 mpg increase and I think it came out at 4. So the pickups are an abuse of the program. I also still say that the most of the vehicles traded in were by people who could afford to trade if they wanted to, thereby taking fairly good used vehicles off the road. These vehicles should have kept and sold at a discount to the people who can afford a decent clunker and get there real real clunkers off the road. That didn’t happen. Those cars are still on the road, burning lots gas and oil. Just another government program run amuck!

There has been a lot of debate back and forth about every government act of infusing money into the economy. There are those who believe that no money should be loaned or given EVER and if a company is struggling then let them die. There are those who believe that charity goes a long way and in the end helps everyone. Personally I believe that everyone at their core is instinctually selfish. No one complained when cash handouts were made as so called “tax rebate” checks not long ago. It’s now about where, why, and how the money is spent by our government. It’s entirely WHO the money is spent on. And let me tell you, the loudest opponents to any government aid are the people who WANT to take advantage of it but don’t qualify.

So for the Cash4Clunkers program, I think it did exactly what it was supposed to do. Never mind all the commentary or discussion about higher MPG for economic or environmental reasons. The program was always intended, whether publicly admitted or not, to stimulate the auto industry sales and help economic recover.

Now there are those who would shout from the hill tops that this didn’t do our economy any good but those people are not looking at the cyclical pattern at the 30000 foot level. Here’s how it goes…

1. Ford gets a sales boost
2. Ford keeps 87000 people employed
3. 87000 people pay their mortgages, buy food and other products
4. Banks and retail stores make money on the products they sell to those 87000 people
5. Retail stores buy more product to continue to sell to those 87000 people
6. Product manufacturers make money on those retail sales keeping their employees working who in turn pay their mortgages and buy other products.

Now if we let the car companies die we would see a snowball effect. First those 87000 followed by the dealers, parts suppliers and maintenance providers. Then all those mortgages go unpaid and foreclose causing the banks to layoff. Putting more people out of work and driving down retail sales even more causing more layoffs and business shutting down.

So in the end you can see what the benefits are. A large number of cars were sold keeping Ford and others in business and saving countless jobs in the long run. And on top of that as a “bonus” we get better fuel economy and emissions boosting our long term goals of controlling pollution and reducing oil consumption. Everybody wins, EVEN the guy who is angry he didn’t have a clunker to trade in because somewhere in the elaborate web of connected benefits his job was probably saved too.

Ok, rant over, soapbox going back into storage. Happy driving everyone!

Aaron – I think you are dead right, especially your comments about not scoffing at a 13% change. It really makes a difference. I recently moved from a compact to a mid-size vehicle, changing my mileage from 29 in the city to 24. On paper, this looked like a small price to pay (for the added room, etc.), but I definitely feel the difference in my monthly gas bill.

Funny that elsewhere on the about.com site, there is a clear statement that keeping your old vehicle is better for the environment than buying a new one due to the impact that manufacturing and transport inflicts – somewhere between 12% and 24% of total carbon footprint…. The jobs and trickle-down-economics arguments are good ones, imho, but the environmental side is looking like a bust. And the long-term trickle-down-economics side is looking bleak too, imho. Our great-great-grandchildren will be paying for those jobs kept today. Sometimes it is better to bite the bullet now and really fix the issue – American cars are not the innovation leaders they once were. We need to get that back (or show it if its latent somewhere).

I guess my objection to the whole program was they were trying to bill it as something good for the environment. So 2 MPG may be good for the consumer, but once you added up all the resources used to make a new car and dispose of the old one it didn’t make much environmental difference.

Having said that, I still prefer it over the Candian government’s program… They’ll give you a $300 rebate if you trade in any 1995 or older car. Woohoo!

my question is this if our liberal president and administration were so concerned with stimulating the american economy why wasnt the cash for clunkers program limited to Ford, Gm and Chylser? didnt most people buy foreign cars over american manufacturers cars?

because if you limit what cars you can buy, you shortchange the:

Workers in Lexington who build Toyotas

Workers in Alabama building Mercedes-Benz

Workers in Tennessee who build Nissan, Saturn and soon
VW

Workers in Ohio and Indiana buiding Hondas

The list is a lot bigger…

Hyndai workers in Alabama…

ETC

“liberals” see a bigger picture.

Conservatives see themseleves.

My main problem with CFC is what I feel is a double standard by the American consumer. So many are wailing about GM and Chrysler “taking government money.” Well, so did thousands of consumers when they took CFC money. I’m sure someone will chime in as they did on another thread about how I can’t look at these two issues the same way, and how the auto makers taking the money was so much more wrong on so many levels.

Well, no matter how it’s explained, I do see them as the same thing. If it’s OK for Americans to take $4500 from the government to buy a new car in order to stimulate the economy, and it’s OK for Americans to take a $500-1000 tax rebate check which is meant to stimulate the economy, but is instead used for a multitude of other things, then it’s OK for an industry to ask for and take government money to help keep them afloat.

Scream and jump dissenters, ’cause I’m not changing my mind.

You can argue all day about the worth of most government programs, but the overall effect of this much spending will be terrible. The liberals running our government are blowing money at a completely unprecedented rate even though federal tax receipts have fallen off a cliff: http://www.bizzyblog.com/2009/11/13/though-alarming-aps-report-on-october-deficit-still-misses-the-big-ugly-picture/ The government is taking in about 18% less money than it did last October, and 24% less than October of 2007, while spending is totally out of control. Corporate tax receipts for last month were actually negative. This is bound to end badly.

Really? Liberals got us here? Really?

Eric makes a good point (except for that not changing his mind part). Corporations have been legally viewed as individuals practically from the inception of this country. If an individual can take “government money” so can a corporate entity….and they have on many, many occasions. So to be consistent, you need to justify government aid by some other means (there have been whole books written on this subject) or never dole it out at all.

One area of reasoned debate revolves around government ownership of those companies that have received aid. This is where the main philosophical debate lies.

The other issue is the composition of the “government money”. Once an individual or government has spent all of its revenue, any additional spending has to come from lenders (or from theft-wars).

The cash for clunkers program and the automobile cos’. bailouts were funded not by the taxpayers (at least not yet); rather they were funded by borrowed money.

So if Eric could change his mind, disagreement with partial governmental ownership of corporate entities, or borrowed stimulus $$ would likely loom large.

As with many issues, I’m on the fence with this one. Stimulus NEEDS to pay off big if the money is borrowed because payback is a B!^&#. The idea behind any kind of stimulus spending is that you can drive a sector or an entire economy into growth that creates and sustains far more wealth than it took to create it in the first place. The “stimulus” needs to stimulate or you are far worse off than you were before you ever started stimulating. But….so far I haven’t seen the kind of growth figures that justify the money+interest industry-wide (notwithstanding Ford). Our national deficits are bloating to nearly cartoonish proportions as spending and revenues have taken divergent paths. But time will tell.

I’m against government ownership of corps. on a philosophical level but am interested to see if it works. I would hate to impose my viewpoint on those whose very livelihoods depend on the success of the automobile industry.

The national effects on pollution and energy consumption, while good, were so small that they dwindle to near meaninglessness.

I’m no pundit. I have the right and privilege to keep an open mind. So I don’t know if CFC was a good idea or not. The future will tell that tale—I hope things improve soon. Anemic recovery won’t pay the bills.

The government does not have a right to take my hard earned money and give it to somebody else to buy a new automobile. Now, instead of somebody having a paid-off car, they went and stretched themselves, even more to the breaking point. How is added debt a good thing? (Unless you are the feds, then just print more funny money) This is short sighted, and an unauthorized use of tax money. I really don’t care how good idea you think it was. It was wrong. They spent what, about 3 billion, that’s billion dollars on this project…..stupidity at its finest!.

Ed Meyer’s pain is understood. I too hate it when my tax money is given to others for their benefit. Kinda like how our government has been building infrastructure in Iraq, while ours is falling apart. Worse yet, they lied about it all in the begining. At least in the CFC program they didn’t lie about the progam’s intent.
To many of us it’s kinda tough to see $ spent like this, but if you’re the auto worker, the car salesman, etc, it’s really a downright brilliant program to them.

For you ideologues, please read the following analysis of CFC program: http://www.edmunds.com/help/about/press/159446/article.html

The market would work much better, and the economy would recover much sooner without interference from government.

Remember that free markets gave us the strongest and most resilient economy in history. Check the government’s track record: Medicare, Medicaid, Social Security, Post Office….
To Mike in Minn: If you’re interested to see if government ownership of industry works, just look at countries with struggling economies (Cuba, Venezuela et al). It’s not like it hasn’t been tried before.

Larry —

What about France, where the government took over Renault, returned the company to profitability, and then returned the company to the private sector?

What about Great Britain, where privatization of the railways was supposed to bring better service and lower cost? Not only has it failed on both counts, but the rail system is now costing British taxpayers *more* money in private hands than it did when they owned it.

What about Los Angeles, which has a municipally-owned power company (Los Angeles Department of Water and Power)? During the electricity crisis of 2000-2001, when the private companies had to resort to rolling blackouts, LADWP kept the lights on at my house. Not only that, they sold power to the private utilities. LADWP is entirely self-funded, consumes no tax dollars, and in fact contributes a good chunk of its income to the City of Los Angeles.

If government ownership is so evil, why do we trust them with the most valuable services in our community, specifically police and fire? Government ownership is not the great evil so many people say it is, and the examples of Renault, British Rail and LADWP are just three examples of where the government has succeeded when private industry failed. — Aaron

Aaron
I wasn’t aware of the examples you cited. I can’t, and wasn’t trying to make the case that government ownership, or stewardship (temporary) is evil in all cases. Also, I’ll admit that free markets need effective regulation.
We need to acknowledge, however, that declaring some industries “too big to fail” puts us on a slippery slope. In the long term, perhaps restructuring under the bankruptcy code would have been option for GM.

Aaron,

Well stated…lest you forget the Queen’s bailout of Rolls Royce, back in the early seventies.

I am very confilicted with whether this program was worth it, and really haven’t seen an unbiased analysis of pros and cons. Personally, better net mpg is good, but keeping vehicles from the poor and charities. Supporting the automakers (and autoworkers) was probably good, but putting some used car dealers out of business and raising prices of used vehicles was not. I’m surprised environmentalists were ok with destroying many perfectly usable vehicles. I thought destroying something and expending the energy to create something to replace it before it was needed was undesirable. Anybody have a link to this kind of analysis, and if it was a good program when everything was taken into account?

Once again Aaron resurrects his triple play of government run enterprises that debunct all other rational arguments.

A teeny tiny motor company in a tiny little country is taken over by the government, subsidized(sound familiar?) and finds it’s way back to the private sector as a profitable enterprise.YAWN!

An antiquated form of travel performs poorly in Britain. Whoda thunk it?

One municipal electric company in the middle of Gold’s myopic world succeeds.

Hell, let’s just dump capitalism. I’m convinced!

Like Margaret Thatcher said: “The problem with socialism, you eventually run out of other people’s money”.

It’s a no brainer, if I ran the country and took over the auto industry, the first thing I’d do is create a scheme to put more money back into the very enterprise I own by printing more money.

This year the auto industry, next year, healthcare.

C

Are you Chuck or Rush. Get an original thought.

Reducing the amount of fuel use reduces demand, which reduces the price of oil for gas, diesel, heating oil, plastics, and all other petroleum products. Remember that almost all of the car will be recycled to produce other products thus, reducing the need for raw materials (sustainability). Anything that gets lazy Americans off their butts to trade in the crap we have been producing in America and buying a product that gets better fuel mileage which happens to be made by a foreign country then, so be it.

I am not sure if any of you, people travel to different countries but if you did you would notice that other countries such as Australia have vehicles that get better fuel mileage because they have a lot of clean diesel products. And who makes a lot of them in Australia? Guess? Ford and Holden (GM). Why can’t we get our country to get on the diesel train?

So stop finding blame and get off your lazy American butt and come up with a solution. Sorry, too tough for the country that is failing their children. Maybe you should complain more about how you can get our children educated to be the future or start learning Chinese.

I am getting very tired of debating with people who use a straw man argument to distract from the current topic.

I believe the root of our disagreement on the CFC and pretty much every other irrelevant topic brought up in this thread, is the fact that we too often use irrelevant points to divert the argument to something else so we don’t have to debate the original points and think we have therefore won. We may do this intentionally because we know we won’t win the original debate. Or we more often do this simply because we don’t know enough about the original topic so we bring up other items that seem like they are related but or totally irrelevant to the topic at hand.

If you need a lesson in the foundation of a straw man argument then look here. http://en.wikipedia.org/wiki/Straw_man

Otherwise let’s return this discussion to the topic at hand. CFC, is a 2 MPG increase on a 15 MPG vehicle worth it? I agree with Aaron that yes it is when you look at the increase as a percentage instead of just the number taken out of context.

As for Chuck who offers us the typical republican response of trying to knock down the previous point with exaggeration and sarcasm instead of countering with any real data, I challenge you to make a proper counter point. Instead of childishly belittling the instances Aaron mentioned, name three instances of government operated services that when privatized actually improved instead of getting worse. Do your homework because as far as I know there isn’t a single one.

DFI; While I’m not a Repub. (I’ll clear that up right away), I still think that Chuck’s primary arguments are no “straw man” since they directly attack Aaron’s examples in #16. Whether or not you agree with Chuck’s assertions is a separate issue.

Chuck didn’t address the primary question from the article/post regarding the CFC program but he *did* respond to Aaron’s post, not a side issue that he inserted (I suppose it might be someone else’s “straw man”). He doesn’t think Aaron’s examples are analogous enough to the current situation to be valid.

I’m not sure if he’s right, but its an interesting answer–especially if we see a major auto co. failure in the future.

I think it demonstrates again that a large swath of America distrusts its own government’s ability to effectively run a program. Listen to the rhetoric; you’ll find that this is a central theme. Americans on the right and center-right are worried that too much money is going to fund inefficient, unnecessary, or downright corrupt government programs…..and, of course, that is the tie-in to the CFC topic; It is a new government program. Thus, and again, this isn’t a straw man, even if it does divert attention away from the initial question because how you answer the one question will have some bearing on how you answer the other.

As Aaron and maybe Chuck would agree, there is room for disagreement. Cheers.

Joe, You must be mixing too much vodka with the kool-aid?

Let’s look at how much we saved environmentally? That 2 MPG savings of gasoline on 125,000 cars took 24 minutes to use up. What did it cost? $3 billion dollars that we don’t have. Joe, surely you’re aware that the U.S. Government has a heavy stake in Chrysler and GM? Isn’t it ironic that the government takes over an enterprise and then blatantly subsidizes it’s own enterprise? I guess you can look at it like it’s buying votes? Ya think?

Oh I know you enviros believe in the addage that if it only saved one tree, wouldn’t it be worth it? No, not at all Joe.

C

DFI, obviously you didn’t read your own link regarding “definition of strawman”? I was addressing Aaron’s red herring which is a legitimate point of debate.

So, you see, your misdirection about definitions of words you don’t understand is just a “Strawman”.

Your second attempt at a misdirection is my homework assignment to find industries that have been privatized. No thanks, I don’t accept your silly assignment. It’s a strawman and serves no purpose besides distracting from the issue of CFC which was a boondoggle from the gitgo.

BTW-13% is a number taken out of context. What effect is 0.27% increase of new cars guzzling 13% less fuel going to have on the environment and economy?

I know you enviros have good intentions but somehow the reality and the enormity of the effect these programs have on our society simply escapes you. But they sure make you feel good about yourself don’t they?

C

Chuck! How I’ve missed you.

Renault is the biggest automaker in France, the country from whom we bought about a third of our land here in the US. They sold 2.4 million cars last year, about 2/3rds as much as Honda sells worldwide, all without selling in the world’s biggest market (ours). They also own almost half of Nissan. I’d hardly call them tiny, and I think they’re a great example of government intervention in an automaker. The fact that said government intervention was a raging success is a rather unfortunate and inconvenient fact for the naysayers.

Rail is hardly antiquated. It’s fast, convenient, and efficient, the reason so many nations rely on it. The fact that the United States doesn’t have any sort of nationwide high-speed rail system is a crying shame. No, more than that — it’s an embarrassment.

Aaron

“This year the auto industry…next year health care?” Chuck??? Too bad it wasn’t the other way around years ago. Considering 44,000 Americans will die annually due to lack of health care insurance in “THE GREATEST COUNRTY IN THE WORLD” How many tens of thousands of our fellow citizens have been sacrificed on the sacrifical altar of capitalistic dogma and conservative demagoguery? How many more will you, Rush and Glen Beck stand to sacrifice before you realize that the gods of corporate greed care nothing of you or anyone…only the profit margin. You who tout the Constitution should read the opening words well: a Government of the people, for the people and by the people” …nothing there says anything about by, for, or of the corporation. By the way the word for “people” in latin is “socio”… the root of that favorite word you guys love to toss around.

Let the name calling begin!

Aaron,

Renault 1980s vs Renault 2009. Get your historical facts right. Your analogies were based on what happened 25 years ago. France was/is a small country and Renault was a floundering auto manufacturer. A very small one at that.

I know you and your little comrad buddies are embarrassed to be Americans. I’m not. I have no desire to become Euronized. Go for it. It fits.

C

44,000 deaths??

Don, you too have been drinking the far left loonie kool-aid. That figure has no basis in fact and is another loonie left phony statistic used to sell the healthcare crisis charade. It’s simply not true and you should be humiliated to admit you’re a lemming.

C

“Let the name calling begin!”

“you’re a lemming.”

?!

Chuck,

You and your tea bag gang should be well versed in phony statistics and information. After all because of phony data and info, you sent 4000 American kids to their deaths in Iraq, countless thousands of bodies and minds shattered, families untold in shambles, our country disgraced… but wait their was a bright side to this! Big oil has secured the 2nd biggest oil fields for the West raising gasoline prices to $3.00 a gal and oil company profits to record heights, secured by an army that is bankrupting US coffers, while Cheney and his merry band of criminals have secured billions in non-bid contracts for his former (?) company…only to move their corporate offices from the US to the Persian Gulf. Perhaps Healthcare reform, if overturned by your bought and paid for congressmen, will be the the final nail in our economic coffin.

LOL….I just love how liberals debate. When the facts aren’t there to support their inane assertions, they mindlessly shotgun every meaningless leftist cliche’ to avoid the obvious.

C

That was a great debuncting, Chuck!!!

The problem, Chuck, is that when people give you solid facts, you reject them as irrelevant, regardless of what we say. Ergo, there’s not much point in replying to you — you’re going to believe whatever you want to believe, and you’re not about to let reality get in your way. — Aaron

Aaron,

I’ve accepted all your facts but they just aren’t persuasive. Trains, cars and small electric companies taken over by government have little to compare to what this government is doing. I know you’re a little socialist wannabe but the vast majority of us don’t want it.

You people always want something as long as someone else will pay for it. Or, you want to redistribute income from the folks who have achieved and give it to those who can’t or won’t try to achieve. This egalitarian BS doesn’t work. It can’t, it’s against human nature which is a reality that slips right by you pinheads. People will not work harder for the benefit of someone else as they will for themselves. THAT’S a fact Aaron.

C

>You people always want something as long as someone else will pay for it.

Not true. I make a comfortable living and pay for social programs with my tax dollars. What you don’t seem to realize is that we pay for these things either way. I know I’m going to pay for health care whether it’s private or nationalized. I’d rather it be nationalized, because then I know that the money I pay is going towards providing health care rather than providing executive salaries and shareholder dividends.

By the way, our “small electric company” is the largest municipal utility in the United States. But again, Chuck, feel free to ignore the facts if they don’t suit your argument. The nice thing about being close-minded is you don’t have to deal with the emotional turmoil of realizing you might be wrong.

Since you guys brought up health care, let’s compare ours to Canada’s. What’s the number 1 reason for bankruptcy in America? You guessed it…medical bills. What place in Canada? It doesn’t place anywhere on the list…NOBODY declares bankruptcy for medical bills in Canada.
Try to find 5 Canadians making $125,000 that will trade their “socialized one payer system” for what we’ve got. I guarantee you won’t. Canadians will complain about the health care system, like we complain about the US Post. Yet neither of us want to see them go away.
The only Canucks coming here for medical procedures do so because they’re fat cats looking for what they perceive to be better quality or service. Perception does not equate to reality because our mortality rates are worse than Canada’s (World Health Organization).
Don’t believe me Chuck? Start Googling!!