Cash for Clunkers: Dumbest Program Ever?

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Shooter

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As the Cash for Clunkers program begins to wind down, I nominate it as the dumbest government program ever. Here is what the program will have accomplished:

--A few billion dollars worth of wealth was destroyed. About 750,000 cars, many of which could have provided consumer value for many years, were thrown in the trash. Suppose each clunker was worth $3,000 at a guess, that would mean that the government destroyed $2.25 billion of value.

--Low-income families, who tend to buy used cars, were harmed because the clunkers program will push up used car prices.

--Taxpayers were ripped off $3 billion. The government took my money to give to people who will buy new cars that are much nicer than mine!

--The federal bureaucracy has added 1,100 people to handle all the clunker administration. Again, taxpayers are the losers.

--The environment was not helped. See here and here.

--The auto industry received a short-term “sugar high” at the expense of lower future sales when the program is over. The program apparently boosted sales by about 750,000 cars this year, but that probably means that sales over the next few years will be about 750,000 lower. The program probably further damaged the longer-term prospects of auto dealers and automakers by diverting their attention from market fundamentals in the scramble for federal cash.
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http://www.cato-at-liberty.org/2009/08/21/cash-for-clunkers-dumbest-program-ever/
 
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I'm gonna go with Star Wars (costed 100 Billion in 1983 dollars or more some was black budget) or No Child Left Behind which was the Coup DeGrace for public education. Or the Office of Total Information Awareness which was under the control of Admiral "The buck stops here Iran/Contra" Poindexter. Extraordinary Rendition program. Or the Drug War/Prison Industrial Complex programs. All of those were/are much worse. And there's quite a few more too.

That said Cash for Clunkers was an awful, awful program. Hardly some historical event of note though. No one will remember it in a year if it takes that long.
 
I don't know... Some of those points are valid, but on the other hand, it helped stimulate the economy is several ways- at the auto makers, for people who were able to partake (and many of those are the middle income), and to a certain extent the environment.

Overall, I liked the program and thought it has been the most effective from the Obama admiistration to date.
 
The auto industry received a short-term “sugar high” at the expense of lower future sales when the program is over. The program apparently boosted sales by about 750,000 cars this year, but that probably means that sales over the next few years will be about 750,000 lower. The program probably further damaged the longer-term prospects of auto dealers and automakers by diverting their attention from market fundamentals in the scramble for federal cash.
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This has to be one of the stupidest arguments ever.

Sales over the next few years will be 750,000 lower!! Oh no!!! Because, heck, we might not be around in five years so let's drag it out. Let's put tens of thousands more back out on the street as unemployed.

Cash for clunkers was a great program that accomplished two main goals:
1) Help the environment. You can argue this one if you really feel like there's nothing left to argue.
2) Boost auto sales.
 
I'm not going to go down the "worst program ever" track, but I think there are a couple of math points that stop it from being "great".

1. At $3B, every American with tax liability ($ given to the gov't) paid ~$40 so that 750k or so Americans (1% of that total, .6% of tax returns), could save ~4k on a new car. Doesn't seem like a great use of cash. But if it was a de facto stimulus for the car companies to get back on their feet, maybe it was worth it. Though I'd like to see someone smarter than me talk about the effect on used car prices for taking 750k decent vehicles off the road.

2. For the "help the environment" side, there are about 200M vehicles on the road in the US. 750k of the "clunkers" got traded in, so that in 1/3 of 1% of cars, there was at least a 4mpg increase (iirc). Is $3B a "great" price for a ~15-20% mpg increase in 1/3 of 1% of American cars?

On another note, which Americans did this help? The banks right now are still very tight with lending--I'm pretty sure it wasn't Joe Average American Income and Credit Score getting these deals on new cars. Anyone have any numbers for the demographics of who traded cars in and got benefits from this? Were they from cities or suburbs? East Coast or West? Luxury cars, imports, or domestic sedans?
 
Jesus, Joseph and Mary, but do any of these policymakers understand economics or economic history? Frederic Bastiat, a 19th century French economist, wrote about this very issue. It's called "The Broken Window Parable". The entire point is there are effects that are seen and effects that are unseen.

http://www.econlib.org/library/Bastiat/basEss1.html

We just broke a bunch of windows and are celebrating the effects seen. Shamful. Absolutely shameful.
 
maxiep said:
Jesus, Joseph and Mary, but do any of these policymakers understand economics or economic history? Frederic Bastiat, a 19th century French economist, wrote about this very issue. It's called "The Broken Window Parable". The entire point is there are effects that are seen and effects that are unseen.

http://www.econlib.org/library/Bastiat/basEss1.html

We just broke a bunch of windows and are celebrating the effects seen. Shamful. Absolutely shameful.
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What's wrong with celebrating the effects seen? That doesn't imply that the unseen effects have been ignored.

I guess the counterargument to Bastiat is that the consumers who bought new cars would not have spent that $20K on new shoes, but would have saved it instead.

barfo
 
I was talking to my mechanic about this program (I've got a Honda on its last legs). He said he's helped a number of cars "limp" (his word, not mine) to a dealership to get the credit. He said a lot of these were just sad sack cars on their way out. Which kind of makes sense--most popular trade-ins were 15 year old Ford Explorers. You just know a 1994 Explorer is not going to be long for this world.

I'm amazed anyone could consider this the dumbest government program ever. I don't care what your political philosophy is--it just demonstrates a massive ignorance about the colossally stupid and expensive programs we've had over the years.

I only wish the worst program we've ever had only cost us $3 bil and had at least some beneficial results. We'd have the most efficient government ever conceived if that were the case.
 
This was pretty lame. One year after france did this, their car sales were down 20%. I am thinking a similar effect, you cannot artificially create demand, the market will stabilize itself over the long term.
 
BTOWN_HUSTLA said:
This was pretty lame. One year after france did this, their car sales were down 20%. I am thinking a similar effect, you cannot artificially create demand, the market will stabilize itself over the long term.
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But it did artificially create demand, so really your whole argument is moot.

No one in the government or outside of it ever stated that the program would spawn long-term, consistent auto sales. IMO, it's design was to help auto sales and help the environment.

If anyone thinks the government was implying a long-term beneficial relationship I'd like to see the link.
 
BTOWN_HUSTLA said:
This was pretty lame. One year after france did this, their car sales were down 20%. I am thinking a similar effect, you cannot artificially create demand, the market will stabilize itself over the long term.
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I suppose the argument is that even if this is true, it's worth juicing the economy now in hopes that a year from now when sales fall our economy will be in better overall shape. Pretty standard Keynesian economics, I suppose.
 
yakbladder said:
But it did artificially create demand, so really your whole argument is moot.

No one in the government or outside of it ever stated that the program would spawn long-term, consistent auto sales. IMO, it's design was to help auto sales and help the environment.

If anyone thinks the government was implying a long-term beneficial relationship I'd like to see the link.
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short term, yes. but i was talking about the long term effects. as i stated, the industry will self-adjust, and i think in the short term you are going to have a drop of car sales after the program is discontinued.
 
I agree that short-term, this program is a drop in the bucket. The thing where this program might succeed, long-term, is by making energy efficiency "cool" to the average American - which is an absolute need. We are about 5% of the people on this earth, but we consume 25% of the oil produced. This discrepancy is just absurd and can not last long-term without this country becoming incapable of supporting itself.
 
I disagree with the premise of this post! And when I can find an equally hyperbolic and idiotic counter-point article, I'll send it your way so you can just dismiss it as a idiotic liberal crap!!!!!!!!!!
 
andalusian said:
I agree that short-term, this program is a drop in the bucket. The thing where this program might succeed, long-term, is by making energy efficiency "cool" to the average American - which is an absolute need. We are about 5% of the people on this earth, but we consume 25% of the oil produced. This discrepancy is just absurd and can not last long-term without this country becoming incapable of supporting itself.
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gas going up to $4+ a gallon has done more for making energy efficiency "cool" than anything the government can do. If they really want to make americans value fuel efficient cars, impose a $2/gallon gas tax.
 
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BTOWN_HUSTLA said:
gas going up to $4+ a gallon has done more for making energy efficiency "cool" than anything the government can do. If they really want to make americans value fuel efficient cars, impose a $2/gallon gas tax.
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Please don't remind them...I like playing south of 3 bucks a gallon.
 
i would actually love to see this. if companies have carbon credits, why not the american consumer? what's good for the goose is good for the gander! impose the tax on gas to offset their carbon emissions!
 
BTOWN_HUSTLA said:
gas going up to $4+ a gallon has done more for making energy efficiency "cool" than anything the government can do. If they really want to make americans value fuel efficient cars, impose a $2/gallon gas tax.
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The way we drink the liquid gold in this country - they might have to. This, btw - has nothing to do with the issue of loving the earth - it is just cold, hard economic data. Sooner or later all these other countries with a lot more people than we have will increase their oil consumption (we already see it with China - and India will be coming along very soon) - making our economy that much more in a hole if we can not reduce our dependency on it.

As for the $2/gallon gas tax - we already pay it to support out troops protecting the Saudi royalty, keep the Iraqi oil machine running and the like... it's just not called a gas tax, it's called being patriotic...

At the end of the day - it comes down to marketing, unfortunately.

Personally, I have no problems with people driving big trucks for their work and farmers using the oil as needed - but the Expeditions and Suburbans used to ferry one kid to soccer practice are just dumb...
 
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