# Cash for Clunkers - Destroying Wealth **URL:** \ **Category:** Great Debates\ **Created:** [August 1, 2009, 4:00am UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959 "2009-08-01T04:00:05Z")\ **Posts on this page:** 20\ **Page:** 12
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [August 5, 2009, 4:53pm UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/221 "2009-08-05T16:53:38Z")
> [@ElvisL1ves](#): > > The top 3 models sold under the program are the Ford Focus, built in Michigan; the Toyota Corolla, built in California, and the Honda Civic, built in Indiana. I drive past the California plant everyday, and my neighbor used to work there. He doesn’t look a bit Japanese. The salesman at my local Toyota dealership doesn’t either. Anyhow, I thought those guys were for free trade. ---
**Author:** ![Gangster\_Octopus](https://avatars.discourse-cdn.com/v4/letter/g/a8b319/32.png) [@Gangster\_Octopus](https://boards.straightdope.com/u/Gangster_Octopus)\ **Post date:** [August 5, 2009, 5:08pm UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/222 "2009-08-05T17:08:30Z")
> [@Voyager](#): > > C4C and a gas tax are not mutually exclusive. C4C just gives a one-time boost to fuel economy, but it is hardly the solution. I don’t think anyone is claiming that. An increase in the gas tax to reflect the social costs is much better, and allows industry to innovate to meet increased consumer demand for efficient cars. California has high gas prices for other reasons, but this has increased efficiency for us. While I don’t think they are mutually exclusive, politically, it would be difficult to have both soultions. And I do recall, although I don’t have a cite, that some were crying for the C4C program to be made permanent. ---
**Author:** ![SenorBeef](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/senorbeef/32/2220_2.png) [@SenorBeef](https://boards.straightdope.com/u/SenorBeef)\ **Post date:** [August 5, 2009, 5:52pm UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/223 "2009-08-05T17:52:36Z")
> [@Voyager](#): > > I drive past the California plant everyday, and my neighbor used to work there. He doesn’t look a bit Japanese. The salesman at my local Toyota dealership doesn’t either. > > Anyhow, I thought those guys were for free trade. Free trade = government subsidizing foreign products? ---
**Author:** ![Cheesesteak](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cheesesteak/32/3694_2.png) [@Cheesesteak](https://boards.straightdope.com/u/Cheesesteak)\ **Post date:** [August 5, 2009, 6:24pm UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/224 "2009-08-05T18:24:36Z")
Damn those US built foreign products! They should be buying good old American cars that are built in Korea or Mexico. The best part of this nonsense was when Toyota joined NASCAR. It had to be pointed out that the Camry was the only model in the series that was actually built in the US. ---
**Author:** ![MOIDALIZE](https://avatars.discourse-cdn.com/v4/letter/m/e274bd/32.png) [@MOIDALIZE](https://boards.straightdope.com/u/MOIDALIZE)\ **Post date:** [August 5, 2009, 6:27pm UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/225 "2009-08-05T18:27:45Z")
Dey took our jerbs! ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [August 5, 2009, 7:26pm UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/226 "2009-08-05T19:26:37Z")
The point is that any cars sold that are not made in the USA wind up being a foreign subsidy using U.S. tax dollars, and therefore have to be counted against any ‘multiplier’ effect. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [August 5, 2009, 7:27pm UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/227 "2009-08-05T19:27:26Z")
> [@SenorBeef](#): > > Free trade = government subsidizing foreign products? No, free trade = government treating foreign and domestic products equally. Especially when the domestic products are made overseas and the foreign products are made here. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [August 5, 2009, 7:30pm UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/228 "2009-08-05T19:30:08Z")
> [@Sam\_Stone](#): > > The point is that any cars sold that are not made in the USA wind up being a foreign subsidy using U.S. tax dollars, and therefore have to be counted against any ‘multiplier’ effect. That part of their value going overseas, true. Also the profit from domestically made cars. Free trade does have some downsides, but I think the consequences of being in a trade war over this would be worse - even for the domestic car companies. ---
**Author:** ![Chopper9760](https://avatars.discourse-cdn.com/v4/letter/c/cdc98d/32.png) [@Chopper9760](https://boards.straightdope.com/u/Chopper9760)\ **Post date:** [August 5, 2009, 8:21pm UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/229 "2009-08-05T20:21:58Z")
> [@Voyager](#): > > This question indicates that you didn’t get my point. I’m not against all tax credits, but C4C is more effective than a credit in this case. Say ED would buy a car for a later credit at $14,500. He will be financing that whole amount, but say could pay back $4500 when he gets his credit. (Which is dubious.) With the program, he only finances $10K up front. The difference is the interest on the $4500 from now until next April. If he had all the money, he could also get more than 6 months of interest in the $4500 he saved from now until April, when he’d get the money back and be able to invest it. The bill at the pump would be the same in both cases. This assumes that a tax credit would drive the same kind of consumer interest as C4C which is hardly clear. The $4500 off the sticker price might look like a much bigger bargain than it rationally is, but behavioral economics tells us this stuff counts. You’re right, I didn’t expect that any rational person would buy a car and finance the ENTIRE amount. What kind of moron doesn’t have a significant down payment to offset the interest exactly as you described? Folks taking advantage of C4C need to be able to make a car payment regardless of the $4,500 coupon. Whether the consumer gets the coupon immediately or at tax time is largely immaterial to the effectiveness of the program. Whether I take $4,500 off the top and take advantage of a lower principle as you describe (an advantage that’s been eliminated by dealers raising their prices in the face of C4C) or you get a break come tax time, the program inherently flawed and poorly executed. Inherently flawed because it sets limits that work against the primary goals of the program. **Improve the Environment** - There will be some improvement, no doubt but the qualifications for the program mean that very little progress is made. The age of the car limit alone excludes the worst of the cars on the road, why have an age limit at all? The determination of fuel economy is also poorly done as it is based upon the mpg of a new model, not an old, used clunker. Why not just set the insurance limit? No one insures a yard bunny. **Stimulate the Economy** - Car sales have gone up and that is good thing but it’s a short term spike that appears to be largely artificial because the program fails to create consumers. That is, the only people able to take advantage of the program are people who could already afford a car. If financing $14,500 is out of your reach, it hardly seems fathomable that financing $10,000 suddenly makes it possible – if +/-$75per month is a significant factor in your budget, you probably shouldn’t be buying a car. So the program takes money from me and folks like me who can’t afford a new car and gives it to people who can already afford a car - it’s unfair and it makes no sense. Meanwhile the folks driving true clunkers who are even worse off than I am didn’t get any help even though they needed it. C4C stimulated the economy in the short term but failed to create **new** consumers, thus there will be a spike in car sales that will even out over the long term to break even - that’s not worth the tax money. What about the car dealerships? Few have been reimbursed due to a tangle of paperwork and a broken website. The drain on dealers’ resources is either taken off the backs of the employee or the consumer, either is a net drain on the economy. Even setting aside the [Edmunds.com](http://Edmunds.com) assessment, there are significant costs that no one seems to be considering. Namely that the government suddenly has to process one heck of a lot of paperwork. They’re either giving people temporary work or paying overtime to existing employees thereby driving up the cost of the whole bloody mess yet again. It appears that we are paying through the nose to destroy ‘shitboxes’ that are kind of shitty but not too shitty, otherwise they don’t qualify for the Shitbox Destruction Program. Meanwhile the shittiest of the shitboxes get shittier. Much fanfare over a classic bread and circuses ploy that at best breaks even and more than likely has a net drain on our economy. So yeah, I think the whole thing is B.S. and since I’m probably not going to change my mind, I’ll cede the field. As someone stated up thread, there’s little to discuss when we clearly subscribe to different economic theories. Good luck to you anyway. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [August 5, 2009, 8:31pm UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/230 "2009-08-05T20:31:21Z")
> [@Voyager](#): > > That part of their value going overseas, true. Also the profit from domestically made cars. Free trade does have some downsides, but I think the consequences of being in a trade war over this would be worse - even for the domestic car companies. I would never advocate a ‘buy American’ clause (which the original bill had) for precisely the reason you mention. But then, I wouldn’t advocate for the program at all. Real free trade means freedom from government interference, and that includes freedom from government subsidy of your competitors. One of the forgotten groups in all of this are those businesses that would have collected some of the money that was directed to new car dealers through a subsidy. For example, I think it’s likely that used car dealerships were hurt by this program. People who might have otherwise traded for a better used car were pushed into a new car, and their own used car was destroyed rather than being made available at auction for used car dealers to buy up for inventory. Also hurt: Any other business that might have received some of the consumer dollars redirected to auto dealers. The benefits of free trade don’t magically appear just because trade crosses international borders. It’s just that it’s usually international crossings we talk about, because internal trade is assumed to be free. But every one of these subsidy programs is an attack on domestic free trade. ---
**Author:** ![Cheesesteak](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cheesesteak/32/3694_2.png) [@Cheesesteak](https://boards.straightdope.com/u/Cheesesteak)\ **Post date:** [August 5, 2009, 8:32pm UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/231 "2009-08-05T20:32:16Z")
> [@Sam\_Stone](#): > > The point is that any cars sold that are not made in the USA wind up being a foreign subsidy using U.S. tax dollars, and therefore have to be counted against any ‘multiplier’ effect. True, except that every car, even “American” cars have a proportion of their assembly/parts done overseas. You can see this in the [Cars.com American Made Index](http://www.foxbusiness.com/story/markets/industries/finance/carscoms-american-index-crowns-toyota-american-manufacturer/) where the winner was… Toyota? ---
**Author:** ![emacknight](https://avatars.discourse-cdn.com/v4/letter/e/3ec8ea/32.png) [@emacknight](https://boards.straightdope.com/u/emacknight)\ **Post date:** [August 5, 2009, 8:53pm UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/232 "2009-08-05T20:53:42Z")
> [@Sam\_Stone](#): > > The point is that any cars sold that are not made in the USA wind up being a foreign subsidy using U.S. tax dollars, and therefore have to be counted against any ‘multiplier’ effect. He’s also forgetting the fact that during the Great Depression, it was protectionist policies that prolonged and exacerbated the problems. It’s not a bad thing for the policy to help other countries. A recession in Japan, South Korea, and Europe are also bad for the US. This was a massive global recession we were/are/might-have-been in. At this point it seems like the opponents of this program are arguing in circles. It either gave cash to failing US automakers who are uncompetitive, or it’s giving cash to foreign companies that are taking American jobs, or it’s destroying wealth, or it’s creating excessive demand and reducing supply. ---
**Author:** ![Rumor\_Watkins](https://avatars.discourse-cdn.com/v4/letter/r/d9b06d/32.png) [@Rumor\_Watkins](https://boards.straightdope.com/u/Rumor_Watkins)\ **Post date:** [August 5, 2009, 9:03pm UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/233 "2009-08-05T21:03:04Z")
> [@Chopper9760](#): > > You’re right, I didn’t expect that any rational person would buy a car and finance the ENTIRE amount. What kind of moron doesn’t have a significant down payment to offset the interest exactly as you described? You’d (EDIT: global “you”, not “you” as a poster) be a fool not to take 100% financing on an asset that dwindles in value to 0 if you’re being offered competitive interest rates. ---
**Author:** ![SenorBeef](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/senorbeef/32/2220_2.png) [@SenorBeef](https://boards.straightdope.com/u/SenorBeef)\ **Post date:** [August 5, 2009, 9:05pm UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/234 "2009-08-05T21:05:16Z")
> [@emacknight](#): > > At this point it seems like the opponents of this program are arguing in circles. It either gave cash to failing US automakers who are uncompetitive, **or it’s giving cash to foreign companies that are taking American jobs** , or it’s destroying wealth, or it’s creating excessive demand and reducing supply. I did not intend to make that case. **Voyager** implied it was hypocritical to be pro-free trade and anti-government subsidies and I just tried to point how absurd that was on the face of it. ---
**Author:** ![Magiver](https://avatars.discourse-cdn.com/v4/letter/m/4491bb/32.png) [@Magiver](https://boards.straightdope.com/u/Magiver)\ **Post date:** [August 5, 2009, 9:11pm UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/235 "2009-08-05T21:11:28Z")
> [@ElvisL1ves](#): > > The top 3 models sold under the program are the Ford Focus, built in Michigan; the Toyota Corolla, built in California, and the Honda Civic, built in Indiana. That’s a nice way of saying 2 of the top 5 are not. While the transparency is a little slow to reach the masses it is safe to say a substantial amount of this future debt went overseas. Regardless of the figure, all of the debt remains behind. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [August 5, 2009, 9:24pm UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/236 "2009-08-05T21:24:32Z")
> [@emacknight](#): > > He’s also forgetting the fact that during the Great Depression, it was protectionist policies that prolonged and exacerbated the problems. It’s not a bad thing for the policy to help other countries. A recession in Japan, South Korea, and Europe are also bad for the US. This was a massive global recession we were/are/might-have-been in. My sole point about this was that the ‘multiplier’ expected of this program will not be as big as simple theory would indicate, for many reasons including the fact that a certain percentage of the money will be spent overseas, and therefore not multiply in the U.S. economy. > [@](#): > > At this point it seems like the opponents of this program are arguing in circles. It either gave cash to failing US automakers who are uncompetitive, or it’s giving cash to foreign companies that are taking American jobs, or it’s destroying wealth, or it’s creating excessive demand and reducing supply. None of those effects are mutually exclusive. And no one said a thing about ‘taking American jobs’. ---
**Author:** ![emacknight](https://avatars.discourse-cdn.com/v4/letter/e/3ec8ea/32.png) [@emacknight](https://boards.straightdope.com/u/emacknight)\ **Post date:** [August 5, 2009, 9:28pm UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/237 "2009-08-05T21:28:00Z")
> [@Chopper9760](#): > > Inherently flawed because it sets limits that work against the primary goals of the program. > > **Improve the Environment** - There will be some improvement, no doubt but the qualifications for the program mean that very little progress is made. The age of the car limit alone excludes the worst of the cars on the road, why have an age limit at all? The determination of fuel economy is also poorly done as it is based upon the mpg of a new model, not an old, used clunker. Why not just set the insurance limit? No one insures a yard bunny. But from all the data released there was progress made, lots of progress. Low mpg old cars were traded in for higher mpg new cars. As stated before, it was NOT an environmental policy, that was a side benefit as part of a larger overall stimulus package. This was a way to kick start new car sales, and at the same time improve the overall average mpg. There also was an insurance rule, had you read the various websites you would know that the car had to have been insured, to the buyer, for a year. It also had to be drivable, so yard bunnies were excluded. > [@Chopper9760](#): > > **Stimulate the Economy** - Car sales have gone up and that is good thing but it’s a short term spike that appears to be largely artificial because the program fails to create consumers. That is, the only people able to take advantage of the program are people who could already afford a car. But again, I feel that you missed the intent of the program, applied your own intent, and then are criticizing it for not doing what you thought it should do. The term I heard a lot over the past few months was “cash on the sidelines.” Part of a deflationary spiral is that people with money stop spending. They still have their money, they still want to spend it, but fear or future doom prevents them. This program encouraged exactly those people to get out and buy the new car they wanted back in September but held off on. That was part of the recession. New car sales slowed, Toyota and Honda saw their first ever retractions (I need to check on the accuracy of that statement). The program gave consumers the confidence to get out and buy the new car they already wanted, but were waiting to buy. But if they had continued to wait, more dealerships would have had to close, more factories would have been put on hold, more suppliers were have contracts canceled. That is what causes a recession. A stimulous package is then designed to break that cycle, and encourage people to go spend. This one, specific aspect, of a much larger bill, was designed to encourage people to buy a new car NOW instead of in 6 months. From what I can see, it did exactly that. > [@Chopper9760](#): > > So the program takes money from me and folks like me who can’t afford a new car and gives it to people who can already afford a car - it’s unfair and it makes no sense. Meanwhile the folks driving true clunkers who are even worse off than I am didn’t get any help even though they needed it. I’m actually quite tired of hearing that. No offense, but if you can’t afford a car, I find it hard to believe that you are paying a significant amount of tax. It seems to be that the people this program is targeting are those that are well off and actually paying for the program. If you want a real criticism, perhaps rephrase that to say, “this program is a joke, it’s giving rich people $4500 now, but will tax them for it later.” Poor people that “need” this program aren’t paying enough taxes to complain about this small an amount. What do you suppose your share of the $1billion price tag would work out to? And how confident are you that there couldn’t be spillover from this to your industry? If a dealership closes, the businesses around that dealership suffer. And please note, this is not a direct or personal attack, and don’t personally care about your circumstance. I am, however, bothered by this line of reasoning, “I’m poor and can’t afford a new car, but I’m paying for it.” If you’re poor, you’re not paying for it. > [@Chopper9760](#): > > What about the car dealerships? Few have been reimbursed due to a tangle of paperwork and a broken website. The drain on dealers’ resources is either taken off the backs of the employee or the consumer, either is a net drain on the economy. I’d like to see a cite for that. I seriously doubt the dealerships are going to get stiffed. Even if the system was down for a day, they will get their money. > [@Chopper9760](#): > > Even setting aside the [Edmunds.com](http://Edmunds.com) assessment, there are significant costs that no one seems to be considering. Namely that the government suddenly has to process one heck of a lot of paperwork. If there is one thing the government is set up to do, it’s process paperwork. > [@Chopper9760](#): > > It appears that we are paying through the nose to destroy ‘shitboxes’ that are kind of shitty but not too shitty, otherwise they don’t qualify for the Shitbox Destruction Program. Meanwhile the shittiest of the shitboxes get shittier. The program wasn’t meant for the shittiest of shit boxes. It was meant to spur new car sales, while also improving overall mpg. > [@Chopper9760](#): > > Much fanfare over a classic bread and circuses ploy that at best breaks even and more than likely has a net drain on our economy. Again, if there is something the government is really good at, it’s bread and circuses. From my perspective, when the economy goes into the shitter, bread and circuses are needed. I was a little disappointed that President Obama didn’t parachute into an empty dealership lot with a giant “mission accomplished” sign in the background. > [@Chopper9760](#): > > So yeah, I think the whole thing is B.S. and since I’m probably not going to change my mind, I’ll cede the field. As someone stated up thread, there’s little to discuss when we clearly subscribe to different economic theories. Good luck to you anyway. Which is exactly my point. If you hate government spending, and don’t believe stimulus packages work, than you’ll really hate this program. 6 pages of debate won’t change that, but you should at least be knowledgeable about the program and accepting of the data presented. I don’t like the program either, but I think it might actually work. ---
**Author:** ![ElvisL1ves](https://avatars.discourse-cdn.com/v4/letter/e/5daacb/32.png) [@ElvisL1ves](https://boards.straightdope.com/u/ElvisL1ves)\ **Post date:** [August 6, 2009, 1:22pm UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/238 "2009-08-06T13:22:19Z")
> [@magiver](#): > > That’s a nice way of saying 2 of the top 5 are not. Nope, only 1 of the top 5. And only for now. Numbers 4 and 5 are the Toyota Prius and Camry. The Camry is built in Kentucky. The Prius is still built only in Japan, but Toyota is setting up a plant for it in Mississippi. Just out of curiosity: What is a “foreign car”? :dubious: > [@Sam Stone](#): > > And no one said a thing about ‘taking American jobs’. Kinda follows from this, don’t it? > [@Sam Stone](#): > > The point is that any cars sold that are not made in the USA wind up being a foreign subsidy using U.S. tax dollars “Foreign” in this case includes a heapin’ helpin’ of Canada, too. ---
**Author:** ![SenorBeef](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/senorbeef/32/2220_2.png) [@SenorBeef](https://boards.straightdope.com/u/SenorBeef)\ **Post date:** [August 6, 2009, 5:02pm UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/239 "2009-08-06T17:02:00Z")
> [@ElvisL1ves](#): > > Kinda follows from this, don’t it? No, it doesn’t. He didn’t say there was anything wrong with buying foreign products, he said that if the government subsidy ends up going to profit entities outside the US, you lose some of the multiplyer effect because it’s probably not going to be reinvested into the US economy. ---
**Author:** ![ElvisL1ves](https://avatars.discourse-cdn.com/v4/letter/e/5daacb/32.png) [@ElvisL1ves](https://boards.straightdope.com/u/ElvisL1ves)\ **Post date:** [August 6, 2009, 5:07pm UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/240 "2009-08-06T17:07:02Z")
> [@SenorBeef](#): > > No, it doesn’t. He didn’t say there was anything wrong with buying foreign products Please scroll up. The comment he made was denying that anyone, including him, mentioned “taking American jobs”. > [@](#): > > he said that if the government subsidy ends up going to profit entities outside the US, you lose some of the multiplyer effect because it’s probably not going to be reinvested into the US economy. And therefore “American jobs” are lost. QED. [Previous page](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959.md?page=11) [Next page](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959.md?page=13)