By Steve Rhodes
I don’t know what to think about Cash for Clunkers.
Undoubtedly, it’s a boost for the economy. And not just for auto dealers, but scrappers and supply chains and everyone else in the stream that will feel the ripples.
At the same time, it’s an awful lot of (taxpayer) money.
An investment worth making?
Perhaps.
But the psychology of the whole thing is a bit baffling too. If dealers had just offered $4,500 off of qualifying models, would they have been as swamped with buyers as a program offering “free” government money?
Lost in the shuffle, too, is the environmental component: taking polluting clunkers off the streets for less-polluting models.
That’s where the notion voiced by critics that we might as well subsidize buying new furniture doesn’t hold up.
But what will this do to the used-car market? The clunkers consumers are trading-in are not allowed to be re-sold; they must be destroyed.
Those clunkers, though, are sometimes the only cars some folks can afford.
I’ve yet to read anything persuading me to a particular point of view on this, and maybe there isn’t one. For a relatively simple program, it’s relatively complex.
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Should the program be extended?
Maybe the Obama administration ought to claim victory and move on.
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On the other hand, can the Obama administration craft similar programs for other parts of the economy?
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“At last Washington has produced a stimulus idea that actually works – the ‘cash for clunkers’ program that has auto dealers and thousands of car buyers smiling,” Steve Huntley writes. “Also sporting a big grin is economist Irwin Kellner, who’s feeling vindicated for the concept he pushed months ago, asserting that the best stimulus is one putting dollars directly into consumers’ hands.”
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Would this program have been as successful if it didn’t have such a marketable name?
Cash for Clunkers – C4C – is priceless.
And eminently parodiable.
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Clunker punditry.
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Clunker comments welcome.
Remember to make clear whether you intend comments for publication – and whether your full, real name can be included. (If not, please say why.)
COMMENTS:
1. From Devin Hogan:
I remember reading earlier this year that the idea actually came from Germany and was so successful it had to be extended.
WSJ has a great article on how chemical distributors are reaping a huge windfall due to the death ingredient needed to kill the engines.
Who’d have thought?
2. From Mark Loehrke:
Imagine how much more compelling that old Victory Auto Wreckers commercial would have been if the guy whose door fell off was getting a cool $4,500 from the tow truck driver instead of what appeared to be maybe $70.
3. From Pelham:
Cash for Clunkers is most excellent, and can also be applied to the $23.7 trillion bank bailout (that astounding figure, by the way, is reported by the Treasury’s own official watchdog). And, probably, it will be applicable to whatever ramshackle frankenstein health-care “reform” the Democrats manage to extrude from Congress. I say this because we have a clunker system that will probably be preserved and extended (according to the latest emanations from DC) with cash from mid-range taxpayers, who are already paying way more for health insurance/care than their counterparts in any other industrialized country.
Incidentally, I respectfully disagree with you on the cost point for the car program, at least from a relativistic standpoint. A few billion dollars is big money only in absolute terms; relative to the many trillions the banks are getting, it’s just about literally (in proportionate terms) a drop in the bucket. But unlike the bank bailout, it’s actually producing results, the merits of which can certainly be debated.
One more thought: A few months back, I ran across a Bloomberg news item that said the money then spent or in the pipeline for the bank bailouts (I think it was something like $4 trillion at the time) would have been enough to pay off 90 percent of all the housing mortgages in the country. Ninety percent!!!
Think about that. Let’s say that fairly early in what was then the subprime meltdown we had simply appropriated, say, $3 trillion to pay off half of all the mortgages in the country (in such a way that we reduced by half everyone’s monthly mortgage payments). The banks and insurers directly or indirectly on the hook for these shitty securities would’ve still been rescued–pretty much unfortunately. But, more importantly, just imagine the enormous stimulus for the economy! Immediately every homeowner would have had hundreds of extra dollars in his/her pocket to actually go out and spend. And maybe a fraction of THAT could’ve been taxed away to pay for the enormous, FDR-scale infrastructure upgrades (not the piddling stuff the Obama administration is pissing out) necessary to restore U.S. competitiveness.
Now, the taxpayer would’ve still been on the hook for this indirect bailout. And the equity issue is no small one, since non-homeowners would have taken an undeserved hit. And we’d be rewarding irresponsible home buyers, who bought more home than they could afford, as well as house and condo flippers (although I’d argue that the lenders bear 99 percent of the responsibility, since they always have far more market info than any individual buyer and they pushed the subprime paradigm).
But the hit would’ve been only a small fraction of the $23.7 trillion we’re taking now (which I think comes to something like $80,000 for every man, woman and child–or $240,000 for my lucky household). And where’s the equity in simply handing over these aneurysm-bursting sums to the banks and getting NOTHING back AND, in fact, setting the stage for even worse too-big-to-fail situations in the future, since banks are using the money to go out and get even bigger by buying other banks?
Cash for Clunkers Cubed, I’d say.
4. From Brian Alves:
I was initially against it. But you cannot argue with success. The program has definitely kick-started the industry, given a dose of optimism to people and gotten a lot of old cars off the road. It appears that the mpg difference between the junked cars and the new cars is 8 mpg, which seems to be a pretty good spread. At this point, it would appear that the government is – as they say in poker – pot-committed, and they need to put in another $2 billion and then call it quits.
Sure beats plowing billions more into the useless F-22 program.
As it turns out, our 12-year old-Chevy didn’t qualify but we bought a new Chevy Malibu anyway. It appears to be a quite a good car that can stack up against Toyota, Honda and Hyundai.
Smooth Criminal
I know it’s wrong, but you have to give props to Ella Orko, the 86-year-old woman who was just arrested for the 61st time. There’s probably a book here – one with variable levels of sadness.
Digital Divide
One-fourth of Chicagoans don’t use the Internet.
If that seems like a lot, consider that it’s not much different than the poverty rate here.
Mary Mart
Mary Mitchell channels Howard Brookins today without any evidence that she’s researched for herself – after all this time – the issues surrounding Walmart’s proposal to build a store in Chatham.
It might be interesting, for example, to see what Mitchell thinks about this piece from MSN’s MoneyCentral:
[E]ach of Wal-Mart’s promises has a flip side:
* Jobs: Check. But, after an initial boost, studies show a net loss of jobs.
* Low prices: Check. So low that wages and benefits are reduced as well. Then the neighbors follow suit.
* Tax boosts: Check. But that boost comes at the expense of communities nearby, which tend to lose any businesses that compete. And don’t forget to factor in the cost to taxpayers of subsidies for Wal-Mart and public aid to low-wage workers.
When Wal-Mart comes to town, “it’s a switcheroo,” said Nelson Lichtenstein, a professor of history at the University of California, Santa Barbara, and the author of The Retail Revolution: How Wal-Mart Created a Brave New World of Business.
“They create jobs now, immediately,” he said. ‘Over time . . . they erode better jobs.”
It’s not clear at all that building a Walmart is good for your community.
What’s curious is why Walmart officials aren’t the ones being questioned. Why are they holding jobs hostage by not being an adequate employer?
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Mitchell is similarly perplexing when she endorses the ridiculous notion of aldermanic privilege. “Because Brookins is the alderman, it ought to be his call, and his colleagues should have his back on this,” she writes.
What?
Aldermanic privilege supposes, among others things, that what happens in one ward doesn’t affect any other ward.
It’s astonishing that anyone would believe this in the age of globalization.
Beyond that, aldermanic privilege is simply a method by which aldermen can build fiefdoms in any manner they like without having to worry about colleagues asking questions.
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Eric Zorn also thinks the rest of us should stay out of it.
“My view, for what it’s worth, is that the immediately impacted community – those living in a one-mile radius, say – ought to be honestly surveyed by an objective polling firm. And if they say OK, then OK,” he writes.
“I don’t even think I or most Chicagoans should have a say in it.”
But a Walmart would affect all Chicagoans in lowering the bar for wages and benefits, among other questionable management practices and the noted impact on social services. Surely we all have a stake in this.
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And it’s not as if something unique is happening here in Chicago. Walmart has had problems getting its stores into many cities.
“New York is the largest city in the United States. It’s home to 8.3 million people – 27,147 persons per square mile – and zero Wal-Mart stores,” Wal-Mart Watch notes.
“Much to the chagrin of Wal-Mart and its former CEO Lee Scott, Wal-Mart has had no luck in New York City. Masters of rural and suburban growth, Wal-Mart has never been able to circumvent the city’s strong labor presence, activist population, and restrictive zoning laws. In 2004, Wal-Mart tried to open its first store in Rego Park, Queens and the move was met with opposition from a coalition of politicians, union organizers and community members. [New York Magazine, 8/8/05] Similarly, residents denied Wal-Mart when it attempted to open a store in Staten Island in 2005. [New York Times, 8/22/05].”
The Aldi Option
Meanwhile, the city is selling five acres on the Far South Side to a developer for $1. The developer is planning to build an Aldi there.
Geez, couldn’t the city have at least charged $4,500 – the price of a clunker?
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I would have paid twice as much for those parcels.
Food Fight
Rich Miller isn’t so sure Chatham is actually a food desert as claimed by Walmart and its allies. See why.
Tylenol Trail Goes Cold
Six months after raid, FBI has bupkus.
Feisty Fitzy
No mercy for journos.
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The Beachwood Tip Line: Walproof.
Posted on August 4, 2009