well this is the straight dope - why don’t you grace us with your deeper understanding
No, the argument is more: we’re overpaying for your 1995 POS car; no real reason to grossly overpay for your 1980 POS car. aren’t you the one harping on responsible spending? if i can stimulate production of new cars by overpaying by 20% for a bunch of 10-year-old cars, why would I stimulate the same amount of production by overpaying 80% for a bunch of 30-year-old cars?
just a question, now: are you in the auto recycling business? you seem to really care, almost too much so, about a government program that costs, relatively, nothing.
Calling Cash For Clunkers an example of the broken window fallacy in action is total BS. I don’t know if you’ve noticed, but we’re in the grips of a deep recession. Nobody is spending their money. This program gives them an incentive to purchase a new vehicle with better gas mileage. You’re imagining some hypothetical other purchases the participants in the program could have made had they not participated, but that ignores the fact that nobody is being forced to participate and that they’re presumably getting lots of value from their decision to participate. If the participants had a better use for their money, I think they would have opted for the better use, and not junked a perfectly useable vehicle for no reason.
This was covered above when I raised an eyebrow at the claim of a BWF. The only logical party in all of this who can commit the fallacy is The Government. As I posted earlier, it is asinine to claim that a Government can engage in the BWF if the Government’s objective is to perform a Keynesian Stimulus.
One at a time: If you “got” what a stimulus is for, you wouldn’t be complaining about this. Opportunity costs only matter if the alternative opportunity is identifiable (you ain’t done it). “Distortion” of the market implies there’s a “correct” market out there (you ain’t got that neither). Uncertainty means you don’t know what your sales are going to be. With a subsidy program, you do have some idea. Or are you suggesting it’s better to know you’re fucked than to have hope?
Sigh … I know what has worked in the past, and why, and that it’s generally accepted. You instead have some simplistic, even inchoate ideology out of an Ayn Rand novel.
No, you still don’t. Because you still think this:
No, and it’s becoming clear you don’t even want to understand. I’ve explained it already, and everyone else has grasped it. Cars that old are either not worth anything more than scrap value (certainly not $4500), or are collector’s items. That’s twice I’ve tried to explain, and the last time.
So why do you care so much about it? Is your need to buttress your view that Democrats are stupid so powerful?
What you imagine it, or perhaps wish it, to be, is flawed.
Generally not, because anyone whose circumstances force them to drive it are not likely to buy a new replacement, only a more-recent used one whose manufacture cannot stimulate today’s auto industry.
Is it worth trying to discuss the program with someone so adamantly ignorant about its primary purpose? Well, there may be others reading this, so let’s press on anyway. The primary purpose of the program is to stimulate the manufacture of new cars. Getting clunkers off the road is secondary and unnecessary.
Then you haven’t understood them. Try to set your Democrat-hatred aside and think some more.
And yet it’s an Obama program all the same, innit?
The taxpayers are being forced to participate. The $4500 is money the taxpayers would have spent on something that was worth more to them than buying a stranger a new car. The taxpayers are getting no value for the money. I have a better use for my money than buying ($4500 worth of) a new car for someone else. I’ve never been in the position of being able to afford a new car, so my tax money is going to people better off than me.
Well it’s not entirely true that they’re getting no value - they get the externality of reduced emissions (however slight)
Multiplier effects on basically subsidizing auto purchases are a lot greater than the multiplier effects of giving everyone 600 bucks and watching that money get repaid to creditors or being stored in a bank account.
I’m figuring this program is only going to increase the value of my car by taking all these off the road. The demand for used cars is only going to increase, especially in this economy.
There is also the benefit that a bunch of potentially or actually unsafe cars are being taken off the road. While a 10-25 year old car is not necessarily unsafe, they are more likely to be unsafe than a new car just from the fact they have been subject to more wear.
A lot of the arguing here sounds like sacrificing good in search of perfect. This is not a perfect program. I don’t think there’s ever been a perfect program. It has stimulated sales of new cars. It has replaced those cars with at least marginally more efficient cars. It has at least marginally reduced emissions per mile. It has probably taken some cars that are very old/poorly maintained off the roads and replaced them with vehicles in better condition.
These are all good things. They may not Save the World but they are improvements, even it incremental.
Yes, that has to be balanced against potential or actual negatives, but it will be awhile before it all shakes out, won’t it?
You know, Bush simply wrote most everyone in the country a check a time or two - some of that money no doubt wound up in the mattress (so to speak). Both the TV converter box and cash for clunker programs at least targeted a specific thing, and the money had to be spent, which is what stimulates the economy. Does that mean they’re better than “tax refund checks” or whatever the hell Bush called his method? I don’t know. Would be interesting to take a real look at it, wouldn’t it?
Or hell, next time just issue everyone a $200 debit card that HAS to be used for retail purchases (not stashed in a bank) that expires in 6 months and see what happens. (No, I don’t expect that to happen). Would be an interesting experiment, don’t you think? Right off the top of my head, my truck needs maintenance work, we need a new mattress, I’d like to buy a freezer chest, my husband needs new glasses, I could use some new shoes, our winter coats need cleaning, … there are a LOT of things I could spend $200 on, and purchasing those items would only benefit my local economy, which would benefit the local people.
The money came from the stimulus package. While that was being debated, Sam objected that the stimulus would take a long time to kick in. This billion dollars kicked in right away (faster than expected) and Sam is complaining that it is kicking in too fast. He’s also complaining that the program is injecting uncertainty into the market, as if a market with two companies who just emerged from bankruptcy didn’t have enough uncertainty before, and as if they would complain about more sales now.
As for opportunity cost, we’ve already seen that the alternate spending would be something less stimulative. For consumers, they don’t appear to have been rushing to spend the last quarter, so I fail to see what segment is being hurt. It might well cut into savings, granted, but that is what we need right now.
There is no satisfying some people. The glitches in the system I read about involve it being more successful than expected, and the risk that the government wouldn’t pay for clunkers already bought - which would be a problem if the government hadn’t promised to make good on this. If they hadn’t, then there would be a legitimate complaint.
There’s no satisfying some people. If the government figured out how to make it rain inflation-free $20 bills, Sam would complain about them clogging the sewers.
No, he’s complaining that it’s stupid. And the inherent *problem *with spending programs as stimulus is that good programs take time to figure out and plan.
Are you kidding? In either case, the government paid $4500 and gets back nothing. In one case, they encouraged the destruction of something that had almost no value, and in the other they encouraged the destruction of $4000 worth of productive assets.
I care about the needless destruction of useful machinery. It’s a tragic waste.
I’m saying that the stimulus could have been done many other ways. Used car dealers are hurting too, you know. Why not have a program that simply paid a premium for trading in any car with worse mileage than another car, used or new? And instead of destroying the cars, why not make them available at a discount to encourage the trade-in of even worse vehicles? A 1997 Passat is much, much better than a '74 Impala in almost every way - fuel economy, emissions, safety. Instead of destroying the Passat, why not encourage the Impala owner to trade in for it?
The answer is that this legislation was captured early on by the new car industry, by SEMA, the UAW, and other special interests. It’s much less efficient than it could have been, and it also will have perverse effects. For example, the destruction of 750,000 mid-range used cars is going to actually make it harder for people who drive old beaters to move up - people who couldn’t afford a new car in any case. From here on in, there’s going to be a ‘hole’ in the used car market.
The nature of the market is that you can’t identify the lost opportunity. But there are two definite negative factors here - the distortion of the market from the government incentives, and the cost to taxpayers of the $4500 in the first place.
Uncertainty means you don’t know what the government is going to do that affects your finances. The people who bought new cars last month got screwed, didn’t they? If you bought a vehicle that got poor mileage 10 years ago, you are rewarded by this program for your poor choice. If you were responsible and bought a high-mileage vehicle, you got screwed. If you’re an auto wrecker who just happens to have a big inventory of the affected engines, your inventory just went up in value. If you’re a company selling other kinds of parts for these cars, you just got screwed.
When you have a government which has a habit of interfering in the marketplace, it makes it harder for everyone else to make rational decisions.
No, I’m pretty much in the economic mainstream. Did you read the NY Times article? It made most of the same points I’m making. There are numerous economics blogs complaining about this program. These effects are well known to mainstream economists.
You’re the one not getting it. If the cars are ‘classics’, no one’s going to trade them in. If they’re junkers that should be taken off the road, they’re exactly the vehicles this program should be targeting. And again, I cited the reason for the 25 year limit, and it was specifically added due to lobbying pressure from SEMA, not because of any intrinsic economic good.
Again, this bill was probably the most bipartisan bill to pass in a while. Over half of Republicans voted for it. So I’m not attacking Democrats at all.
What, the used car industry isn’t part of the auto industry? If the nation’s used car lots are full of cars that aren’t moving, why not stimulate THAT? Answer: Because used car dealers don’t have a strong lobbying presence on Capitol Hill.
You can stop with the ad-hominem any time. You might want to re-read my OP - I described the putative purpose of the program in it.
This is simply not true. The ORIGINAL bill had much more stringent requirements for fuel efficiency, and was much more heavily weighted towards getting rid of inefficient cars. It got watered down under pressure from the UAW, SEMA, and other special interests.
So you agree we can dismiss that little cavil of yours. Good.
(1) It was already pointed out to you that “distortion” of the market is only a negative for someone with a predilection to think there’s an ideal and preferable one instead, and
(2) The cost to the taxpayers is an inherent part of a Keynesian effort, which this is. IOW, so what?
In this case, it’s a good thing. I already asked if you think it’s better to *know *you’re fucked than to have some hope. Do you?
Their situation is exactly the same as if there had been no government intervention. Isn’t that what you want? :dubious:
You still don’t seem to get that the planned beneficiary of the program isn’t new car buyers, but the auto manufacturing industry and its employees. You also might acknowledge that a very large percentage of those employee beneficiaries are in Canada, and that the Canadian taxpayer isn’t paying squat for it. Some people will complain about anything, though, as a previous poster has mentions.
There’s the Rand crap again. Please.
Please once again. What part of
(1)Hardly anyone with such an old junker is going to trade for a new car, and
(2) The primary purpose of the program is economic stimulus, and any environmental benefits are secondary and trivial
do you not understand?
Fine. Preservation of genuine classics, not junkers, is a good thing. But that’s secondary and trivial, too.
It doesn’t employ nearly as many people, nor does it have nearly the multiplier effect, and it doesn’t create wealth. Your point?
Better go review how Keynesian economics works, okay?
You can stop any time with complaining about being personally attacked every time you’re shown wrong.
And you got it wrong, and haven’t paid attention to any of the many times it’s been explained to you since, nor have any of your subsequent posts even suggested that you’re getting it. That’s nobody else’s fault.
And the inherent problem with taking lots of time to figure out and plan is that stimuli are needed immediately. Don’t let the perfect be the enemy of the good, IOW.
And don’t use either as an excuse for stalling to death a program with which you have philosophical disagreement. Be honest and oppose it up front, with your real reasons. If you fail to convince people, be honest and consider why, remembering that it might not be just “Because they’re stupid”.
A fair point, and a drawback of entry into the FSA. The additional withholding from a paycheck hurts, especially those with low incomes. It does mean at least seven percent more on each dollar though(SS and Medicare), and having the debit card means they can manage large expenses without a big hit. It could be an education problem and with a few good PSAs it may be overcome.
It sounds like kicking the can down the road, something we seem to do a lot of. The jobs will still go away. The tax base will still have to adjust. How big a difference do those two months make? These are tough months to be out of work, no doubt, but two months later will it be any better? Would it be better to take the hit and move forward or to keep propping up failing businesses? I don’t know which would be better, but the latter is simply not sustainable.
The problem which got us here was people buying stuff they didn’t need with money they didn’t have. If they have a working vehicle, they don’t really need a new one. The money they’re using to pay for these cars is largely borrowed, either from the taxpayer or from other sources. The US has overconsumed for decades. We need to wean ourselves off that, and a program which fixes things which weren’t broken doesn’t really get us there.
It was intended to show Congress as taking “decisive action” on both climate change and economic stimulus. Big, splashy, lots of news coverage, a great way to kick off the upcoming election cycle. Unfortunately it’s now getting quite a black eye
I can’t imagine how much is going to hit the fan if dealerships start getting refused reimbursement by the program. Presumably they’ll be able to re-sell the vehicles at that point and use them as they would any other trade-in rather than them being destroyed, so that should help.
I noticed that too. I guess since we now own them it makes sense to throw some business their way. I just wish we were throwing good business their way. Pushing for real, significant, environmental impact deltas, using the program to help people who really need reliable transportation instead of this focus on “new cars” only. Maybe I’m still bitter over the huge hit my first(and last) car that I ever bought new took when I drove it off the lot. I’m more of a fan of used cars anyway.
If you’re moving towards a cliff at ten miles an hour, slowing down to five miles an hour isn’t going to be enough. We need to make sure our environmental initiatives make real differences and we need to strongly promote responsible financial behavior. Spending sprees are rarely responsible behavior. We’re already seeing significant issues in addressing climate change. It’s not easy, and it won’t be popular(at least not as popular as writing people $4500 checks), but it’s time the grown ups take charge and start making responsible decisions. Sometimes I want to invent a time machine so I can go back in time and kick the founding fathers in the nuts for making congressional terms two years. Short-sighted bullshit seems to be all we ever get out of an election-cycle driven Congress.
Yea, I’m not a fan of the pre-bates(lots of people got rude awakenings at tax time when they were expecting their refund as usual). The cash for clunkers program strongly encouraged people to go out and trade in their existing vehicles for rapidly depreciating assets. We’ve gotten people to take vehicles they had already taken the depreciation hit on, and maybe were not underwater on, and trade them in for a bunch of new vehicles(which take huge hits immediately), and now they’ve got higher car payments again. Most CPAs would probably advise against using this program, but most people don’t have CPAs. Now we’ve got a quarter of a million new cars out there whose value is dropping like a stone and people who are going to be struggling under these new loans for years whereas their existing vehicles they would have been out from under sooner.
Homo economicus is a myth. Just like Piltdown man. He never existed. A person may be rational, people are not. Macroeconomics MUST abandon the rational actor theory if they are EVER going to be able to get on top of things like bubbles or “irrational exuberance.” Behavioral Economics may offer a better model, it may not, but it is clear from the past week that people aren’t behaving rationally right now, if indeed they ever do. If you looked at the average household like a small business and they had a car with a current fleet average, which was in “fair” condition(blue book), and they owed ~3k on it. Would a rational CPA advise them to buy a new car? Take on ~10-15k or more of debt, an asset which will be underwater for at least a couple of years and provide only marginal benefits over their current asset? I sure as hell wouldn’t, for most of the same reasons most of the participants in this thread have mentioned for why they aren’t doing it.
That’s kind of why I have a love/hate relationship with Thomas.loc.gov It’s kind of like watching a nice steak get turned into sausage. Most bills start off with decent intent and focus, and then they get turned into stuff that isn’t fit for man or beast. Blech.
He objects to trashing the engines and drive train. While I’m glad that Sam has turned green, he’s living in the wrong generation if he objects to replacing good stuff with newer stuff. The time to conserve in this way is not when we are trying to increase consumption to pull ourselves out of a recession.
But he specifically said that a problem was moving consumption up, which is going too fast in my book. The response overwhelmed the government. That’s generally considered a good problem.