Why Cash For Clunkers Will Hurt Economy More

Program Destined To Do More Harm To US Economy Than Good

I’ve read Stoutcat’s eye-opening rant Show Me The Money (below) on Cash For Clunkers. I ‘ve also read the article from the AP which she links to. In doing so, and checking additional government web sites, I’ve uncovered a few facts suggesting that the CFC program (actual guv’mint name: Car Allowance Rebate System, or CARS) ultimately delivers negative results under even the best of conditions.


Yet another massive failure of the Obama Administration and its “Hip-pocket Congress”. Consider the following.

From the above referenced AP article, the following numbers:

Through late Wednesday, 22,782 vehicles had been purchased through the program and nearly $96 million had been spent. But dealers raised concerns about large backlogs in the processing of the deals in the government system, prompting talk of a possible suspension.

Note that the number of completed vehicle purchases at this point are 22,782 which, with some qualifying for the $3,500 and some for the full $4,500 came to a total of some $96 million or nearly 10% of the allotted billion dollars. At this rate, only some 225,000 vehicles could be purchased under the program’s $1 billion funding.

Let’s follow some more numbers.  Complete transparency, right?

According to RITA (Research and Innovative Technology Administration), using 2006 stats (the latest complete stats available) there are in the US:
  • Automobiles registered: 135.4 million
  • Light trucks registered: 99.1 million
That’s a total of 234.5 million vehicles in this country. Under the best of circumstances, this program, as currently funded, would only replace about 1/10th of 1% of the vehicles on the road.

While this program may help the dealers sell cars (and people buy them), that’s a ridiculous waste of resources as far as cleaning the environment is concerned.  And that was the positive part of the program!  Now consider the remaining factors:

The Negatives
One tenth of one percent (0.1%) of the vehicles on the road in this country doesn’t even qualify as a drop in the bucket in terms of replacing gas guzzlers with fuel-efficient vehicles. While the Obama administration may want to tout that benefit, it’s all for show with little or no substance. Yet there are negatives that far outweigh the few positive factors here:
  • The program requires that the trade-ins be destroyed. Why? Perfectly good used auto parts that could be re-used during repairs of similar cars is a whole lot more “green friendly” than having to manufacture more new parts which uses more energy (and spew more pollutants into the air in the process). Meanwhile, there will be fewer used car parts available for those of us who don’t qualify for a new car and need to continue repairing our existing ones, or would actually like to trade up to a better clunker.
  • Then there’s the cost of delivery of those new replacement parts. Tsk Tsk. More energy used.
  • Now let’s consider the amount of energy necessary to safely and ecologically destroy these hundreds of thousands of clunkers. And the pollution involved with that.
  • Based on local news reports, the majority of the new vehicles being sold thus far are Hondas, Toyotas, and other foreign brands, as those have a larger array of fuel-efficient vehicles.  This means the majority of this money for this program is not even going to be kept in our own economy, but will ultimately wind up overseas. Clever huh? Just another way Obama is using his magnificent  community organizer skills to steer our economy over a cliff, which begs the question, “Is this intentional?” But that’s another rant for another time.
All of this to replace one tenth of one percent of the vehicles on the road. This is what happens when you have a Congress run by power-hungry morons in support of a President who has never even run so much as a lemonade stand, yet is now in charge of our national economy.

Be afraid, folks. Be very afraid.


Gerry Ashley

6 Responses to Why Cash For Clunkers Will Hurt Economy More

  1. Phil Bailey says:

    Only comment I had was concerning the Hondas and Toyotas with money going overseas. Many of these cars are produced in the US with American workers and plants. So I contest your statement of money going overseas. There is a prosperous auto industry in the US, just not in Detroit. I agree that this is probably another waste of tax dollars though. Can this administration do anything productive?

  2. Kay L says:

    OK, first of all the purpose of the program was environmental, not economic. It wasn’t intended to be “good” for the economy. After all, spending money is not good when you’re broke!

    And secondly, it may be a small percentage of the total number of cars but it might be a significant percentage of gas guzzlers.

    If the program is refunded, it will likely, in total, take almost 800,000 inefficient cars off the road which would be roughly .6% of total cars, but a higher percentage of gas guzzling cars.

    That can be a good thing for the environment.

    In recent years people have been given tax credits for replacing A/C units with more energy efficient units. The units that were replaced were junked, not resold or likely even parted out–and they had to have their refrigeration packs removed.

    Tax credits are not all that different from these rebates. Because you cannot complete the transaction if you don’t have enough income, the benefit is likely going to people who pay taxes. A tax deduction or credit is more fair as more people can take advantage of it and it doesn’t have to be refunded. But, Democrats do not seem to believe in them.

    Personally, I think the economy is running on borrowed time. I believe that the “stimulus” was damaging enough that anything else they do is just beating a dead horse.

    If hyperinflation arrives, the folks who took advantage of getting a new car are going to be happy they have something reliable to drive for the next 10-15 years, because they certainly won’t be able to buy one then!

    • Gerry Ashley says:

      Hi Kay,
      Thank you too for taking the time to comment. As you yourself have pointed out, under the best of circumstances, only a small FRACTION of 1% of the cars currently on the road will be replaced. A FRACTION of 1%. As I stated, that’s not even a drop in the bucket even if they are all guzzlers.

      What’s worse, even if there are 800,000 cars taken off the road, that means there are 800,000 more cars that are being forced to be destroyed as part of the program’s requirements. In some case that might be a good thing, however, why create 800.000 piles of junk when many of them could be stripped of usable parts that could be re-sold to others who may need to repair their car? Many of the parts of todays cars are interchangable with other models marketed by the parent company. That means the fuel pump on a gas guzzler might also fit a more efficient engine on one of that brand’s compact models. But to order each car destroyed? If this was, as you say, a program to help the environment, that’s a pretty foolish rule to require. That represents potentially BILLIONS of dollars in extra toxic waste that has to be handled. It also represents billions in auto parts that will now need to be manufacturered to replace broken parts on existing cars that could have used similar (used) parts from the “clunkers.” That’s been a huge part of the auto repair industry.

      Once again, the Obama administration and Congress had an idea that looked good on paper, but… In fact, I don’t think this even looked good on paper.

      Thanks again. I appreciate the time you took to reply. You make a number of excellent points.

      GA

  3. Gerry Ashley says:

    Hi Phil,

    Yes, I’m aware that many of these cars are produced here, and you may contest me if you like. However, let me point out that the only money that stays here are the wages paid to those workers which, while is important, is but a small portion of the actual price paid. The bulk of the money goes on to the corporation’s coffers overseas. Once that money goes overseas, it seldom returns to stay… except, perhaps, in the form of something else that is sold to send even more money out of the country.

    Thanks for commenting.

    GA

  4. […] Why Cash For Clunkers Will Hurt Economy More « Grand Rants […]

  5. Ayla Souza says:

    Another good article you post here.I m waiting for others to share it with my friends.

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