I have, step by step, shown where you’ve thrown out straw men and changed the argument.
You responded with “… no u! I win!”
I was listening to the head of the North American Dealers Association (autos, not drugs) on this very issue. 45% of sales have been for domestic brands, but the vast majority of cars sold are domestically manufactured. So the benefits to the US economy are far greater for C4C than a person starting a factory in India or China. The moderator said that only 45% of the cars were American made, and the NADA guy corrected her. BTW, he thinks the program is great.
Second, how do you get that investment from tax cuts will be similar to the current investment base? The Bush cuts clearly did not increase consumer spending much, since they were targeted to those who have the money to spend all they want before the cuts. They will invest the way new investments are going, which are primarily overseas, not domestic: thus the shrinkage in manufacturing here. A tax cut targeting lower percentiles would result in some spending for manufactured goods, which also might go overseas, but also significantly more service spending, which stays right here.
Of course he thinks the program is great, it’s not his money and it’s all targeted towards car dealers. 
We should all be getting individual thank you cards from him.
I disagree.
A tax cut would free up investment capital, which is sorely missing right now. Businesses that want to expand cannot get the money because of the banking situation. You have to look at the broader picture.
Can someone explain to me, and I ask this honestly because I imagine there are facts that I’m not aware of, but can someone explain to me the reasoning behind the Democrats shooting down a proposal to donate traded-in cars to charities or to needy families who cannot afford cars?
I can try {fires up spin machine}
First, the proposal seems to me like a big red hearing and entirely disingenuous.
I say disingenuous because where was this proposal back when the original bill was developed? Why did he wait until now, that the bill has gotten attention, to stand up and act like he wants to help charities? I don’t know his record, so I can’t say this with a lot of authority, but my perception is that he was against a Democratic spending bill, he was against an environmental bill, and he would have been against the bill if it had given the cars to charity in the first place, but would now find something else.
As to the red hearing, I still believe that at least a portion of these cars would have been scrapped with or without the program. I peg the number at over 50% based on what I’ve read, but I can understand that some people might put the number closer to 10%. People still have the opportunity to donate their cars to charity for a HUGE tax deduction. Why doesn’t he propose to increase that? Donating clunkers to charities isn’t always a good thing if you burden them with the vehicle that costs more to maintain.
I spend about 20-25 hours helping out a charity that recently received a clunker, and I worry it will end up costing them a fortune in repairs. A few weeks ago I pitched the idea to them to make use of the C4C program! Imagine that, a charity benefiting from government spending. They were all set to move forward until we saw the fine print that said you had to own the car more than a year, this was donated 8 months ago after the previous clunker died.
Lastly, on the environmental side of the equation, part of the program was to force a shift in the overall mpg of cars on the road by replacing low mpg cars with slightly higher mpg cars. To keep the low mpg cars in circulation defeats that purpose.
The way I see it, imagine a bunch of toys with lead based paint. The government offers a program to replace the lead toys with plastic. Does it make sense to donate the lead toys to children in need? Sure you could make the case that kids in poverty would love to have those toys, which is what this proposal sounds like. But in reality, the goal is to get the crap toys out of circulation, while encouraging the purchase of new toys, at a time when toy sales were at record lows.
My head hurts from spinning, I need to sit down.
In addition to the economic stimulus, part of the rationale of the program as I understand it is to decrease the overall gas consumption of the American car “fleet”. Putting these trade-ins back onto the roads would destroy that goal, or at least reduce its effectiveness.
On second read through I did notice that the plan was to include the option for the dealer to donate the car to charity, which would have been great. And after reading through Sen. Tom Coburn’s bio I’m willing to give him the benefit on the doubt on this one.
But then it included this: “(ii) a family that does not have sufficient income to afford, but can demonstrate a need for, an automobile.”
I’d vote down that. If a family does not have sufficient income to afford to buy a car, they do not have sufficient income to MAINTAIN a car. Like I said in my previous post, giving some one a clunker is not always a good idea. Clunkers cost a fortune to maintain. I gave my sister a 14 year old VW Golf, but she had to put several hundred dollars into initial repairs, and then had to scrap it a year later because it would have required an additional $800-$1200.
It shouldn’t come as a shock to people on this board that cars require maintenance, and that cost goes up as the car gets older. Eventually there is a cross over point where the repairs no longer justify the cost of the car. Poor people do not need old clunkers that they can’t afford to maintain.
So, you’re claiming that American productive capacity is now fully utilized, and to increase production we’d have to build new factories, not just start to run existing ones harder? Interesting. Where do you think this consumer demand is coming from? The latest retail sales numbers for larger retailers were pretty much uniformly down. Macys was down 10%. If you were one of their suppliers, would you be looking for investment money to increase capacity?
The credit crunch is (or was) hurting in making the normal loans needed for inventory etc. harder to get and more expensive. That is different from investment for more production.
I don’t think you’re getting my point. The Federal money poured into GM was directly related to the company’s inability to borrow. That’s not to say they weren’t struggling before that but the immediate crisis was cash flow. A tax cut would infuse money directly into the economy across the board both on the consumer side and the market side. It’s a function of getting the most return for tax dollars borrowed.
For what it’s worth, CNBC has an interesting slide show of the top cars traded in and the top cars purchased.
Something I found interesting of the trade ins was that they were all very “hip and trendy” SUVs like the Ford explorer and Jeep Grand Cherokee. Basically, SUVs bought when gas prices were lower and SUVs were cool. These were the vehicles that saw their resale value drop near zero as gas prices went up.
As for the top sellers, most are in the $15,000 range with just the Pryus over $22,000. Which I think would hurt the multiplier effect. Sales tax and commissions (income tax) would be a percentage of the car’s price, so it probably would have been better from the government if the cars bought had been twice as expensive.
Who was it that mentioned edmunds.com? According to CNBC, "Edmunds.com Senior Consumer Advice Editor Philip Reed says “dealers are enjoying a 20 percent increase in gross profit per sale involving a clunker trade-in since the program launched.” " Any idea of that’s good for the economy or bad?
I covered the cash flow issue in the last sentence of my response - GM isn’t the only company with problems. They had particular problems because they were losing so much money every month, and it is possible they would have difficulty finding loans in any case. Certainly a loan to GM couldn’t be considered a loan to have them invest in more production - the money would more likely be used to shed capacity and jobs.
Two things about tax cuts. First, conservative tax cut proposals mostly focus on the wealthy, which does not infuse much money into the consumer side - with the Bush tax cuts being an excellent example. In an environment where the biggest problem is a shortest of investment capital, this makes a lot of sense, but this is not where we are now and it isn’t where we were in 2002. I actually think a tax cut was the right thing to do back then - the ones implemented, though were not the right kind of cut. A consumer cut might have been an effective raise (hard to get during the Bush years) which would have satisfied the need to consume without forcing consumers into taking money out of their over-appreciated homes, and so might have reduced the severity of the crash. I know no one had to consume - I didn’t - but if everyone were like me the economy would be in really sorry shape.
Second, it depends on the kind of tax cut. The rebate last year had a very limited and short term effect. Obama’s tax cut might have worked - I haven’t seen any evidence either way. If it hit my paycheck it got swamped by the effective raise I get when I hit the Social Security cap. But the biggest problem of tax cuts in this economy is that they might get used like the TARP money - go right to the bottom line of consumers in the form of savings or paying off debt. A good thing to do, but now today. C4C money only went to people buying things. Aid to state governments, and infrastructure spending, saves jobs which increases consumption and reduces welfare and unemployment costs.
Tax cuts are not the answer to every question.
When GM and Chrysler were shutting down dealerships, there was a lot of ink on how they were vital to the economy of many small towns, supporting community activities and being a major source of advertising revenues for the local papers. If they are making more now, and can avoid layoffs and buy advertising time, that’s a big plus. it also means that the perceived value for the consumer of buying a car, thanks to C4C, is enough higher than the cost of the car to let them make this profit, so that’s a win also.
Program beneficiary here.
Just wanted to pop in and say that with the exception of a Saturday spent copying and fax-relaying documents to Denver, the Cash for Clunkers transaction was flawless. We got to the dealer, waited for them to finish detailing it and after a few dozen signatures we moved our belongings and the dogs from one car to the other and drove off. Pretty slick.
Haven’t you heard the expression, the plural of anecdote is not data.
Oh, and the way I see it, the government used my tax dollars to buy you a car, so it’s kind of my car too. I’m moving next week so I’ll need it on Friday, try not to default on your loan before then.
And didn’t you feel guilty destroying a perfectly good car? There are children in Africa walking and might never get to have a new car.
Hmm… am I being wooshed, or do you not understand the program at all?
Also, hey Senior Beef wanna respond to my post where I told ya, what’s what?
Also, hey Magiver, wanna respond to my post where I asked you if you’d rather have deficits than a deflationary spiral?
wooshed
You want me to restate the general arguments against massive government spending in an economic downturn? We’ve got threads that cover that issue at length. It’s almost off topic at this point.
You do know the majority of economists think that the government should spend in a recession, right?
My bad. I was in a hurry to catch up on the thread and skimmed.
My point was that I didn’t respond to your post because we were just getting into general stimulus argument territory, which wasn’t the purpose of this thread.