# 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:** 6
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [August 2, 2009, 1:17am UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/101 "2009-08-02T01:17:09Z")
Since the amount of saved fuel doesn’t correlate linearly with the change in mpg, I plugged some numbers into my calculator. If we assume (pulled from my ass) an average vehicle lifetime of 160,000 miles, scrapping a 18 mpg car for a 35 mpg car will save 4320 gallons of gas over the lifetime of the vehicle. Scrapping a 10 mpg car for a 14 mpg car will save 4570 gallons. It looks like the rebate is calculated just on the difference in mpg. 4 mpg difference? Here’s $3.5k. The minimum (talking just about cars here) would be 18 -\> 22 mpg, which only saves 1620 gallons. 10 -\> 12 mpg doesn’t qualify, but it saves more gas (2670 gallons). If I’d designed this bill (if I’d even be in favor of such a thing), I would have constructed it a bit differently. Or maybe I’m misinterpreting [cars.gov](http://cars.gov) or doing my math wrong. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [August 2, 2009, 2:00am UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/102 "2009-08-02T02:00:01Z")
> [@fruitbat](#): > > That is the second time this statement has been challenged. Do you believe the government would do a better job of building cars and selling them to the public than the private sector would. I understand that we may have some difference in opinion in regards to the level of privatization that would be wise in health care or retirement, but surely there can’t be many people who want the government to take over automobile manufacture and sale. If we are funding them we should have input. The pros at auto companies gave us lots of crappy and poorly thought out cars. The Vega, the Pinto, Corvair, Edsel. and many others. ---
**Author:** ![athelas](https://avatars.discourse-cdn.com/v4/letter/a/5e9695/32.png) [@athelas](https://boards.straightdope.com/u/athelas)\ **Post date:** [August 2, 2009, 2:51am UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/103 "2009-08-02T02:51:31Z")
And they and their shareholders suffered for it, not the taxpayer. Also, which American political party had us funding them in the first place? ---
**Author:** ![Hentor\_the\_Barbarian](https://avatars.discourse-cdn.com/v4/letter/h/8edcca/32.png) [@Hentor\_the\_Barbarian](https://boards.straightdope.com/u/Hentor_the_Barbarian)\ **Post date:** [August 2, 2009, 2:57am UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/104 "2009-08-02T02:57:25Z")
> [@Broomstick](#): > > Causing an engine to seize can have the secondary effect of messing up the transmission as it attempts to keep turning when connected parts of the engine are no longer able to do so. It’s a side effect, not an intended effect. But wouldn’t you seize the engine with the transmission in neutral? ---
**Author:** ![Mtgman](https://avatars.discourse-cdn.com/v4/letter/m/b5a626/32.png) [@Mtgman](https://boards.straightdope.com/u/Mtgman)\ **Post date:** [August 2, 2009, 3:16am UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/105 "2009-08-02T03:16:25Z")
I would much rather have seen a [Flexible Spending Account](http://en.wikipedia.org/wiki/Flexible_spending_account) carved out for auto maintenance expenses. It encourages forward thinking, allows people to use full value of their dollars for maintenance(pre-tax dollars) , and it helps spread the cost of big-ticket maintenance out over time. Our health care FSA has been one of the best programs we’ve ever participated in. We don’t have to worry about having the cash on hand when we go to the doctor because it’s already set aside and we have our payment card to use. I dread major automotive issues because having the cash on hand is difficult on a budget. I’d implement an automotive FSA with one additional proviso, if you don’t use it, then you get most of it back at the end of the year. This allows people to budget for it, but if they take good care of their car, and buy reliable vehicles, then they get a mini-refund at the end of the year. If we wanted to get industry involved, maybe offer rebates to shops/dealerships which can document they’re getting people to follow the maintenance schedule, through reminders, more convenient hours, etc. There are a lot of ways this could have been improved over the current implementation. Keeping the original ratio between what was traded in and what was purchased would have made this a much better program. I’ve been pretty irritated with what seems to have an effect of moving cars out of inventory without substantially increasing overall average fuel economy. Count me as a critic of the Cash for Clunkers program. It could have been good, if it were limited to actual clunkers, or promoted actually efficient vehicles. As it was it turned out to be a mediocre, confusing, and expensive program. Enjoy, Steven ---
**Author:** ![Mr.Moto](https://avatars.discourse-cdn.com/v4/letter/m/9de0a6/32.png) [@Mr.Moto](https://boards.straightdope.com/u/Mr.Moto)\ **Post date:** [August 2, 2009, 3:18am UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/106 "2009-08-02T03:18:08Z")
> [@athelas](#): > > …Heinlein got much wrong about the 21st Century, such as his naive assumptions that America today would still have a steel industry in Pittsburgh or an export market for its new cars. I know you were just trying to be funny, but my brother is employed at the Irvin Works in West Mifflin, still rolling out sheet steel to this day. My dad retired from the Edgar Thompson plant about five years ago. And recently I was watching a British TV series, and the main character was driving a Jeep Grand Cherokee. ---
**Author:** ![Magiver](https://avatars.discourse-cdn.com/v4/letter/m/4491bb/32.png) [@Magiver](https://boards.straightdope.com/u/Magiver)\ **Post date:** [August 2, 2009, 3:20am UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/107 "2009-08-02T03:20:18Z")
> [@Broomstick](#): > > My Toyota Echo gets 40-43 mpg _based upon actual use over the last seven years_. It’s not a hybrid. It’s not a “smart car”. It’s a bog-standard Toyota Echo. > > It cost $14,000 brand new. > > Um… what was the problem again? Not everybody can drive down hill in both directions and gain 10 mpg like you. Cudos for this achievement but I don’t see it happening with most drivers. ---
**Author:** ![Mr.Moto](https://avatars.discourse-cdn.com/v4/letter/m/9de0a6/32.png) [@Mr.Moto](https://boards.straightdope.com/u/Mr.Moto)\ **Post date:** [August 2, 2009, 3:27am UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/108 "2009-08-02T03:27:25Z")
> [@Magiver](#): > > Not everybody can drive down hill in both directions and gain 10 mpg like you. Cudos for this achievement but I don’t see it happening with most drivers. Uh, I generally get high-30s with mine mixed city-highway, the car is nine years old and I typically drive carefully but no so carefully as to maximize mileage. ---
**Author:** ![Magiver](https://avatars.discourse-cdn.com/v4/letter/m/4491bb/32.png) [@Magiver](https://boards.straightdope.com/u/Magiver)\ **Post date:** [August 2, 2009, 3:49am UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/109 "2009-08-02T03:49:20Z")
> [@Mr.Moto](#): > > Uh, I generally get high-30s with mine mixed city-highway, the car is nine years old and I typically drive carefully but no so carefully as to maximize mileage. cudo’s minus 5 mpg? ---
**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 2, 2009, 3:52am UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/110 "2009-08-02T03:52:56Z")
> [@Mtgman](#): > > I would much rather have seen a [Flexible Spending Account](http://en.wikipedia.org/wiki/Flexible_spending_account) carved out for auto maintenance expenses. It encourages forward thinking, allows people to use full value of their dollars for maintenance(pre-tax dollars) , and it helps spread the cost of big-ticket maintenance out over time. Our health care FSA has been one of the best programs we’ve ever participated in. We don’t have to worry about having the cash on hand when we go to the doctor because it’s already set aside and we have our payment card to use. > > Enjoy, > Steven I have an FSA also, and it is great - but my tax bracket is high enough to make it pay off, even considering the risk of not using it all. How much of a car maintenance FSA go to those who’d do the maintenance anyway, and thus just not improve fuel efficiency. If I was barely making ends meet, with low taxes on low income, I probably wouldn’t be in an FSA. As for the effectiveness of the program, it is clearly a part of the stimulus package that is getting money into the economy now, not next year. I live near the only car factory in the Western US, which was a joint venture between GM and Toyota. GM pulled out, and Toyota had decided to close it since they can’t afford the whole place themselves. It is staying open two more months, until October, at least, strictly because of the program. Two more months of wages and taxes for their entire infrastructure sounds good to me. The program appears to be bringing people into dealerships who were delaying car purchases. Chrysler is even running out of some models. When computing the cost, you’d also need to compute the benefit of incremental wages and commissions for people making money who wouldn’t be, the benefit of sales tax and vehicle licensing fees on the new cars, the already mentioned benefit of insurance companies getting more from the new car. When you add this to the safety and environmental benefits already mentioned, and reduced inventory costs as dealers sell off some of the cars clogging their lots, this program might be paying for itself. It would be a complicated calculation. Remember, one of the problems we have is getting people to buy stuff. This helps. My 12 year old Saturn gets too good mileage to be in the program, and my truck is worth too much. That’s my only complaint with it. ---
**Author:** ![Broomstick](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/broomstick/32/246_2.png) [@Broomstick](https://boards.straightdope.com/u/Broomstick)\ **Post date:** [August 2, 2009, 11:28am UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/111 "2009-08-02T11:28:16Z")
> [@Broomstick](#): > > Causing an engine to seize can have the secondary effect of messing up the transmission as it attempts to keep turning when connected parts of the engine are no longer able to do so. It’s a side effect, not an intended effect. > [@Hentor\_the\_Barbarian](#): > > But wouldn’t you seize the engine with the transmission in neutral? Personally, I have trouble imagining a situation where I would deliberately seize an engine at all, as I have a bit of a hang up at destroying usable things, but… you know, I hadn’t considered the question. I just don’t know if there’s a reason you’d do this in neutral or not. ---
**Author:** ![fruitbat](https://avatars.discourse-cdn.com/v4/letter/f/58f4c7/32.png) [@fruitbat](https://boards.straightdope.com/u/fruitbat)\ **Post date:** [August 2, 2009, 12:21pm UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/112 "2009-08-02T12:21:38Z")
> [@gonzomax](#): > > If we are funding them we should have input. The pros at auto companies gave us lots of crappy and poorly thought out cars. The Vega, the Pinto, Corvair, Edsel. and many others. No, you shouldn’t buy their crappy cars. Which is exactly the input the American public had for GM. It was a vote of no confidence that didn’t require the government at all. Giving them money so you can tell them they better start making quality cars is bizzare. You can send the same message much more cheaply by not buying their product. ---
**Author:** ![Hentor\_the\_Barbarian](https://avatars.discourse-cdn.com/v4/letter/h/8edcca/32.png) [@Hentor\_the\_Barbarian](https://boards.straightdope.com/u/Hentor_the_Barbarian)\ **Post date:** [August 2, 2009, 1:52pm UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/113 "2009-08-02T13:52:37Z")
> [@Broomstick](#): > > Personally, I have trouble imagining a situation where I would deliberately seize an engine at all, as I have a bit of a hang up at destroying usable things, but… you know, I hadn’t considered the question. I just don’t know if there’s a reason you’d do this in neutral or not. This thread is about the requirement within the CARS program that the "clunkers’ " engines are intentionally seized up to permanently disable them. **Sam Stone** has made the claim that the destruction of the transmission is required as well. He likely believes this because it tends to reduce the amount of salvageable parts (which of course also goes well beyond the mirrors and door handles he later acknowledges. **Sam** , have you ever made more than minor repairs to an automobile?) You suggested that the transmission would be damaged secondarily when the engine was seized, but the process of seizing the engine (see the PDF I linked to earlier) has to be done by pouring a sodium silicate solution and running the engine at 2000 rpm for 3 to 7 minutes. If I were doing this, I certainly would do it with the car in place and the transmission in neutral. Now, I’m certainly no expert on transmissions - I thought about rebuilding one once but that’s as far as I got - so if the transmission could be damaged during this process, I’d really be interested to learn how. ---
**Author:** ![fruitbat](https://avatars.discourse-cdn.com/v4/letter/f/58f4c7/32.png) [@fruitbat](https://boards.straightdope.com/u/fruitbat)\ **Post date:** [August 2, 2009, 2:52pm UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/114 "2009-08-02T14:52:13Z")
> [@Hentor\_the\_Barbarian](#): > > This thread is about the requirement within the CARS program that the "clunkers’ " engines are intentionally seized up to permanently disable them. **Sam Stone** has made the claim that the destruction of the transmission is required as well. He likely believes this because it tends to reduce the amount of salvageable parts (which of course also goes well beyond the mirrors and door handles he later acknowledges. **Sam** , have you ever made more than minor repairs to an automobile?) > > You suggested that the transmission would be damaged secondarily when the engine was seized, but the process of seizing the engine (see the PDF I linked to earlier) has to be done by pouring a sodium silicate solution and running the engine at 2000 rpm for 3 to 7 minutes. If I were doing this, I certainly would do it with the car in place and the transmission in neutral. > > Now, I’m certainly no expert on transmissions - I thought about rebuilding one once but that’s as far as I got - so if the transmission could be damaged during this process, I’d really be interested to learn how. I am not sure how much this matters. Hentor, what if you were a guy who had a nice business providing used and rebuilt transmissions to customers who need repairs? You are profitable, but not making a ton of money as is the case with most small businesses. The government comes up with this bright idea and the market is flooded with hundreds of thousands of transmissions salvaged from these cars. Your existing stock is now worth far less as the market is flooded. Not only that, but the people who would have come to you to repair those ‘clunkers’ now just junk them instead. This is a business risk that can’t be planned for or forseen. In practice it isn’t much different from government seizing your assets. We don’t tend to care much because few, if any, of us run this type of business. It doesn’t make it equitable or fair for the government to create this chain of consequences. ---
**Author:** ![Una\_Persson](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/una_persson/32/346_2.png) [@Una\_Persson](https://boards.straightdope.com/u/Una_Persson)\ **Post date:** [August 2, 2009, 2:52pm UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/115 "2009-08-02T14:52:41Z")
> [@Broomstick](#): > > Personally, I have trouble imagining a situation where I would deliberately seize an engine at all, as I have a bit of a hang up at destroying usable things, but… you know, I hadn’t considered the question. I just don’t know if there’s a reason you’d do this in neutral or not. I cannot imagine a situation where one would not have the vehicle sitting in neutral to seize the engine. Otherwise you’d have to have the drive wheels jacked up, have the car on a dyno, or disconnect the driveshafts. And I doubt the transmission would be damaged, or damaged beyond repair, by the engine seizing. While it could happen, it certainly wouldn’t be a reliable way to do it. Transmissions can typically take huge amounts of shock to them. ---
**Author:** ![Snowboarder\_Bo](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/snowboarder_bo/32/229_2.png) [@Snowboarder\_Bo](https://boards.straightdope.com/u/Snowboarder_Bo)\ **Post date:** [August 2, 2009, 2:56pm UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/116 "2009-08-02T14:56:17Z")
> [@Mr.Moto](#): > > I’m skeptical as to the extent that this exists in the modern automotive industry. Even cheap cars I have owned in recent years have proven surprisingly durable - my Chevy Cavalier had well over 100,000 miles on it and was in fine running order when it was crashed, and my Fiat Panda wore out when it was fourteen years old. > > Actually, this program itself is a kind of planned obsolescence - it makes it undesirable to resell or part out an old automobile simply because the government has deemed it obsolete. But I suppose you consider this a good thing. You suppose a lot, then. I have no opinion on the program. I will mention that I’m not trading in my '78 Chevy Blazer or my '72 Cadillac Eldorado convertible. Both are worth considerably more than $4500, plus the Blazer is my daily use vehicle (the Caddy is just for fun, now). ---
**Author:** ![Hentor\_the\_Barbarian](https://avatars.discourse-cdn.com/v4/letter/h/8edcca/32.png) [@Hentor\_the\_Barbarian](https://boards.straightdope.com/u/Hentor_the_Barbarian)\ **Post date:** [August 2, 2009, 4:55pm UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/117 "2009-08-02T16:55:39Z")
> [@fruitbat](#): > > I am not sure how much this matters. Since the OP’s point was that the destruction of these sub $4500 cars was a destruction of wealth (see thread title) then it matters a great deal just exactly what proportion of the value of the car is actually destroyed, doesn’t it? > [@](#): > > Hentor, what if you were a guy who had a nice business providing used and rebuilt transmissions to customers who need repairs? You are profitable, but not making a ton of money as is the case with most small businesses. The government comes up with this bright idea and the market is flooded with hundreds of thousands of transmissions salvaged from these cars. Your existing stock is now worth far less as the market is flooded. I’m not sure how much the availability of surplus stock would matter if your job is providing repairs to customers, unless you were jacking up the amount you were charging to customers for the parts. Your labor should be the same, and your margin on the parts should be the same. If your job was junking and parting cars, then perhaps the prevalence of available transmissions would matter. > [@](#): > > Not only that, but the people who would have come to you to repair those ‘clunkers’ now just junk them instead. Now this is accurate. > [@](#): > > This is a business risk that can’t be planned for or forseen. In practice it isn’t much different from government seizing your assets. We don’t tend to care much because few, if any, of us run this type of business. It doesn’t make it equitable or fair for the government to create this chain of consequences. The effects you are now concerned about would result from the relief in slumping auto sales, so a) it should be anticipated by those running these businesses, and b) I don’t think that from the standpoint of the American economy we really want to continue to see poor sales numbers in new cars just so that those who part out cars will do better than usual. Do you? ---
**Author:** ![Grumman](https://avatars.discourse-cdn.com/v4/letter/g/43a26b/32.png) [@Grumman](https://boards.straightdope.com/u/Grumman)\ **Post date:** [August 2, 2009, 5:18pm UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/118 "2009-08-02T17:18:37Z")
> [@Hentor\_the\_Barbarian](#): > > I’m not sure how much the availability of surplus stock would matter if your job is providing repairs to customers, unless you were jacking up the amount you were charging to customers for the parts. Your labor should be the same, and your margin on the parts should be the same. Even if the margin is the same, if the overall cost is higher your customers will be less willing to buy your product, so your volume goes down. ---
**Author:** ![athelas](https://avatars.discourse-cdn.com/v4/letter/a/5e9695/32.png) [@athelas](https://boards.straightdope.com/u/athelas)\ **Post date:** [August 2, 2009, 5:27pm UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/119 "2009-08-02T17:27:52Z")
From [here](http://www.economist.com/blogs/freeexchange/2009/07/congress_just_buying_people_ca.cfm): > [@](#): > > Now, as we’ve noted before, the actual environmental benefits of this program may well prove modest. The fuel-economy requirements for the new car were, after all, fairly lax: You could in theory trade in a Hummer that got 14 mpg and get $3,500 toward a brand new 18 mpg SUV. That’s still an upgrade (and, in fact, that trade would actually save more gas than upgrading a 30 mpg sedan to a 35 mpg vehicle), but it’s a meager one. And if the upgrades are, in fact, all meager, they could end up being dwarfed by the energy required to manufacture new vehicles (particularly since dealers have to scrap the “clunkers” that get traded in—many of which are perfectly good, albeit inefficient, cars) > > So essentially, the bill was about subsidising vehicle purchases. The plan worked like gangbusters, and why not—automobile sales plummeted during the recession, resulting in an enormous amount of pent-up demand. With the economy on the mend, buyers didn’t need much or any encouragement to get back in show rooms, but they got it; the vouchers can easily mean 20% off or more on a new car. Happy with their seeming success, Congress is now rushing to authorise $2 billion more for the programme. > > It’s a waste. Environmentally speaking, the money would have been far better spent closing budget shortfalls for mass transit systems or capitalising programmes to weatherise homes…But hey, the sight of hundreds of people rushing to buy new and more efficient automobiles will reflect well on Congress. Don’t expect to see any legislators apologising for what is essentially a policy blunder. ---
**Author:** ![Hentor\_the\_Barbarian](https://avatars.discourse-cdn.com/v4/letter/h/8edcca/32.png) [@Hentor\_the\_Barbarian](https://boards.straightdope.com/u/Hentor_the_Barbarian)\ **Post date:** [August 2, 2009, 5:29pm UTC](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959/120 "2009-08-02T17:29:08Z")
> [@Grumman](#): > > Even if the margin is the same, if the overall cost is higher your customers will be less willing to buy your product, so your volume goes down. Well then, that’s an argument in favor of increased surplus in the number of parted out transmissions, isn’t it? More replacement transmissions and parts, lower cost to your customers. [Previous page](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959.md?page=5) [Next page](https://boards.straightdope.com/t/cash-for-clunkers-destroying-wealth/504959.md?page=7)