Two months less of unemployment benefits from the government (and CA is broke, too), with no wealth being created.
Provided there’s a less consumption-based economy available to transition to, that is, or else there’s just a lot of unemployment and bad debt.
How do you conclude that? The problem is that the program has been so successful that the money is used up.
Dealers are already checking ahead beforehand.
They’re carmakers. How is sending car business their way not “good” business? What else can be done immediately?
Nobody said it was enough. But it’s part of it.
By definition.
You’re right that the long run, and structural behavioral changes, need more attention than they’re getting, but we’re rasslin’ multiple alligators right now.
The real issue with FSAs is the variability of expenses. The medical one worked for me because when I joined it I was paying off my daughter’s braces. Now I take enough pills that I have a baseline expenditure I can plan around. Car costs are a lot more variable. A few oil changes, a tune up, and the rest is either nothing or a big bill. So the risk increases substantially. It’s not a bad idea, but one that might help those, like me, who don’t need it.
Of course it is. A stimulus is not a substitute for a good economy, it is just a method of jump-starting the economy. Things are turning around, and two months more wages means two fewer months to survive until there are jobs again, two fewer months of unemployment expenses by a state government badly hurt by a dive in tax revenues, and two months more to plan for something to replace the plant (which has already begun.)
This is no more propping up a business than a rebate program is. It is not making anyone turn in their cars. It is not telling anyone which car to buy (except in the very general sense of a more fuel efficient one.) It is reducing the amount they have to borrow to get a new car. I suspect a lot of people who are using the program have been waiting for a good time to get back in, and so would have borrowed anyway. Getting them to buy now really helps. I will need a new car in not too long, and if one of mine had qualified I’d be at the dealer.
I don’t disagree. But if everyone consumes like me, the economy would be in even worse shape. We’re big fans of used book stores and thrift shops, and our newest car is from the last century. Whether or not we consumed too much, in the past 8 years we consumed way more than our income, as middle income wages stagnated, forcing people wanting to consume to go into debt. That was politics, to try to make an economy rotten at its core look good. Whatever the right level of consumption is, we need middle class wages high enough to support it and savings also. The best way to accomplish this is exports, but our free traders are far more interested in making sure we can buy from the Chinese and less interested in removing the barriers that keep them from buying from us.
BTW California has had a program where they will pay for your polluting clunker for ages, but I don’t think it was as good as this one. No doubt Sam would have a fit about that also. More positively, it jump started hybrid sales by giving hybrid owners car pool stickers Cash for clunkers doesn’t prevent any other programs to improve MPG even more.
WRT people who bought last month getting screwed, if Coke goes on a deep discount at the supermarket, people who bought it last week got screwed also. When a dealer offers 0% financing, people who had to pay regular interest rates the quarter before got screwed. It’s terrible if the government is involved, but fine if the market alone is involved I guess. Not to mention that anyone with a lick of bargaining power probably got a great deal if they bought in the worst of the downturn.
Let me say, I pretty much an Obamanaut, but the Cash-for-Clunkers is a pretty bad idea. The most envoirnementally sound policy is to recycle and re-use. It is a really amateurish way to make the change, if you ask me.
If they were really serious about increasing fuel economy, they would’ve raised the tax on gasoline.
It fails as a stimulus plan because it involves the destruction of assests, which is bad fiscal policy. A better idea could be to do the same thing, but without the destruction of the vehicles. For example, instead of $4,500 per clunker, how about $3500 + dealer trade-in? That’s more stimulus for your buck.
Destroying cars for environmental reasons is wasteful. If a car worth $1000 is destroyed, the government has just paid $1000 to get 1 clunker off the road. I think the money can be better spent elsewhere, for instance, R&D or incentives for future cars to have better emissions.
Just as a side point re: the environmental impact…
Another boner idea in this is that the dealer has to lock the engine. So the car no longer runs, but still has to be transported to a junkyard or crusher.
So an average car transport semi can haul, what? 12 cars or thereabouts. But they have to be driven onto the tranport trailer. Now, all of these cars have to be transported by wrecker, which may carry 3 or 4 cars.
What’s the environmental impact of all of that additional hauling expense?
It seems like another poorly-planned aspect of the program.
do the trailers not have winches? those car transport semis look pretty narrow to me - i didn’t think you could drive the car up the ramp as there would be no room for the door to open?
I don’t think the few thousand gallons of gasoline saved per vehicle is going to be undone by a temporary increase in scrap transportation. I suppose the car manufacturers could plant some trees to offset that if it’s really a big deal.
How much difference two month’s warning on losing you job makes depends a lot on the person. Me, I got a heads-up before I was laid off. So our household started downsizing before the job was lost, and we did in a calm manner as we weren’t in a panic. As a result, by the time I was laid off we had six months living costs stashed in the bank Without any warning we probably would have had half that.
Of course, not everyone is that smart about their finances.
TLDR the whole thread.
I work for a dealership. We have done 3 C4C deals. About that destruction of wealth point. I think on the open market, I could buy all three of these cars for the money I currently have in my pocket.
Does the term shitbox mean anything to you?
As far as the destruction of the engine goes, they want these shitboxes off the road, and the way to guarrentee this is to destroy the engine after which it will be recycled for scrap metal.
For what , a year ? I think your over estimating how big a hole this is going to be. Regarding your point about spare parts being destroyed, while 750 k is a large number of cars , they are not all going to be one class, make , model or brand and built during times when surplus production was normal.
Oh, I can agree with that. The saving grace of this plan is that it’s rather small potatos as the overall car market goes. That the damage is limited by size does not mean it’s a good program, however.
Heard an interesting thing on the TV news yesterday (which makes a specific cite a little difficult) that at least in the Chicago area a significant number of 20 mpg vehicles are being traded in for 35 mpg vehicles. I think that would be interesting if true, particularly if true across the board for this program. While you can upgrade by just a few mpg if there really are a fairly high number of people upgrading by 10-15 mpg that would definitely make a difference on the environmental aspects of the program.
This program shafts a goodly portion of the middle class. I’m 24yrs old and single and even with a $4,500 coupon, there’s no way I could afford to lay out the cash for a car or add a payment to my budget. However, this program used my tax dollars.
The government took money from me, a person who already cannot afford a car, and gave it to people who make MORE money than I do and can afford a car.
On the flipside, my aunt and uncle, who each pull down a lot more money than I do, have just worked the system. They had a little Nissan sedan for my Aunt and a Tahoe for my Uncle. They sold the sedan for $5,000 and traded the Tahoe using cash for clunkers to get my aunt a new little car, I think she said it was a Mazda 6 but I’m not sure. So auntie ends up with a sportier little car and at $9,500 off and the Tahoe traded away, they have netted some profit and eliminated a car payment. My uncle decides to replace his Cash for Clunkers Tahoe with…you guessed it, a used Tahoe.
So our collective tax dollars payed for Aunt and Uncle to be in the same situation they were in prior to CforC except that Auntie’s low mpg car is a few years newer, Uncle still drives a gas guzzler. It didn’t help the environment one whit. I’m happy for my family but the mind boggles at the “logic.”
How in Hell’s half acre is this program effective?
This is a classic case of concentration of benefits and diffusion of costs. The bill’s cheerleaders point to good old Joe Sixpack buying a new car, but it’s harder to get a good news story about how everyone else is paying for this boneheaded demonstration of the Broken Window Fallacy.
Step 1 - get rid of 2 cars and get $9,500 for them
Step 2 - Spend $25,000+ on 2 cars to replace them
Step 3 - ???
Step 4 - Profit!
The only difference CforC made in the above steps is that they got somewhat more money in Step 1 than they otherwise would have, maybe $1,000 (I’m assuming his used Tahoe would have netted $3,500 on the open market). In return, they spent $20,000+ to buy a new car.
In terms of helping the environment, even though your uncle bought another Tahoe, the Tahoe he owned is now no longer on the road, and a Mazda 6 is.
In terms of helping the economy, the feds spent $4,500 and we got in return:
1 new car manufactured, shipped and on the road
Sales taxes on the sale of 3 cars (Nissan, Mazda, Tahoe)
Outside of the engine/drivetrain, 1 Tahoe’s worth of used car parts, ready for sale.
Hmmm…you realize that that “anecdote” does not equal “data”, right?
Rachel Maddow made the statement on last night’s show that the average MPG of “clunkers” was 16, while the average replacement was 9 higher. That’s a fair jump, if true; assuming an average of 12,000 miles driven per year, that’s a drop from 750 to 480 gallons of gas used per year per vehicle (~35% reduction in gas consumption). I have no idea how many cars this encompasses.
Feel free to check (and correct) my math. Unfortunately, she did not source the citation, so I hold it in suspicion until confirmed.
The problem is that the program has been so successful that the money is used up.