Monday, August 3, 2009

Crash (the economy) for Clunkers

Generalization. People can't do it. Take a concept, apply it elsewhere in a different, possibly wider context. Why is that so hard?

Most of us remember how the Federal government spent the terms of 2 presidents pouring federal money into building the housing market "to help those that could not afford it." Most of this was done by convincing folks to borrow. And most of us can remember the outcome: The crash of the housing market that drug the entire economy down with it. Thanks a lot guys. You helped the poor a lot.

Now take that same idea and bolt wheels on it. We want to take a bunch of folks that have a car that is most likely paid for... and replace it with a brand new car that comes with payments. And we want the taxpayers to shoulder this burden. Convert one asset (a car) into 2 debts (one for the consumer and one for the government). Oh, and it's "for the good of the environment." Oh, please.

I've mentioned before the intrinsic value of a paid for car (or house or tractor or ....) And our wonderful government is trying to remind you that it isn't cash that's important, it's credit. Forget the whole "greatest generation" that worked hard to eliminate debt and reach retirement. Pay for it later. Save for retirement some other time. There's always social security to fall back on. And medicare. It's not your responsibility anyway.

We're told this will help the economy... by asking people to reach out and buy something they weren't sure they could afford.

And remember: it helps the environment. You know, because getting 4 mpg more is going to save the planet. Forget, for a moment, that it actually takes some amount of actual resources and even petroleum based energy to produce a car out of nothing. Forget that the ultimate in "recycling" isn't taking a car and crushing it flat: it's reusing it for as long as it is usable. Come on -- it's more "environmentally friendly" to drive a clunker than to smash it, throw it away and build a new one.

And let's not forget that the "wonderfully altruistic" concept of asking me to subsidize someone's car they can barely afford removes their old car from the marketplace. And don't forget that the old clunker was destined for someone that really couldn't afford a car. In "helping" the new car buyer, the end result is hurting the used car market -- where there are now fewer inexpensive cars for the poor folk to choose from.

Does anyone want to make a prediction on the amount of increase in repossessed vehicles in 3 years?

10 comments:

Og Make Blog said...

Ooooh...oooohh! Me! Me! Over here! I'll venture a guess.

El Gee said...

Let me offer one small ray of sunshine...at least the cars cost less than the $250,000+ homes that people got for little or no interest. Then at least I can afford to get a new car when those shmoes have their "fuel efficient" SUV's and trucks repo'd.

I now return you back to your regularly scheduled rant. 8^)

Chris said...

This is crazy, I just read that this program has already run out of funding in its first week (1 billion in 6 days)... 'Cash-for-Clunkers' Program Runs Out of Gas (http://voices.washingtonpost.com/capitol-briefing/2009/07/cash-for-clunkers_program_runs.html)

Now they are looking for more funding to continue the madness, and to make matters worse, they are trying to take the money from something that might actually be useful: Cash for Clunkers could raid renewable-energy loans (http://news.cnet.com/8301-11128_3-10301160-54.html)

Looks like car company profits are the real hidden agenda here... the words 'powerful lobby' come to mind.

Og Make Blog said...

More likely some union cronyism. Payback to the teamsters and UAW for 'bama's new digs at 1600 Penn. and the Demo's new congressional seats.

If the intended effect was indeed to increase the average mileage of the on road fleet, there are many better ways .... not just trading up monster truckosauri (2 mpg increase??!! Get real.) Germany had a program to trade in older cars... simple and effective.

Og Make Blog said...

Just got some information from a friend regarding certain events/announcements/action today ... seems the gub'ment may really have to deal with being broke and the unraveling just might start. Now we see ... hope you all didn't buy into the sucker rally.

Spork In the Eye said...

The irony (at least locally) is that while this program was intended to sell more cars for Government Motors -- GM ran out of stock due to their extended shutdown. The program is subsidizing Ford, Toyota and Honda instead.

It's almost as if lawmakers are writers for some really bad sitcom.

Chris said...

More GM nastiness:

GM's unusual, government-engineered bankruptcy allowed the Detroit automaker to emerge as a new company — and to shed billions in liabilities, including claims that governments had against GM for polluting. Environmental liabilities estimated at $530 million were left with the old GM, which has only $1.2 billion to wind down. Administrative fees and other claims will soak up that money, and state and local officials told the Free Press they fear the cleanups will be shortchanged. ... The New York Attorney General's Office, seeking to protect environmental claims for cleanup at Massena and other sites, argued that federal and state regulatory requirements should not be eliminated by a bankruptcy sale. ... But [US Bankruptcy Judge Robert Gerber] ruled otherwise.

http://www.freep.com/article/20090807/BUSINESS01/908070382

Chris said...

... or perhaps I should say government stupidity for letting them get away with it...

This just proves that the government hasn't changed their age-old tune that corporate profits are more important than the environment.

Lars said...

I don't know if you are a frequent reader of this excellent magazine, but they did an issue a while ago that I think you would have liked...

Here is a short version of one of the articles:

http://www.wired.com/autopia/2008/05/the-ultimate-pr/

Spork In the Eye said...

I'd say the wired article doesn't go far enough... They calculate the manufacturing of the new car, but not the destruction. Remember: all the cash for clunker's cars were bricked. BRICKED! You can't even pull off a hubcap and sell it. The oil is drained and the engine run until it seizes... then the whole car is crushed. Now add to the cost the idea that this might be one of those '90s fuel efficient cars people want... and can no longer buy because it's been crushed.

Government promoted environmentalism my ass.