• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • Is This What Passes for Economic "Success" in the Obama Administration?

    Celebrating the fact that his administration has blown through $1 billion in deficit spending on the “Cash for Clunkers” program in just one week, President Barack Obama said Friday: “I’m happy to report that it has succeeded well beyond our expectations and all expectations.” And just what exactly has the “cash for clunkers” program succeeded at?

    Cash for Clunkers Has Not Helped the Environment: Thanks to the inclusion of SUVs and small trucks in the program, you could, in theory, trade in a Hummer that got 14 mpg to get $3,500 for a brand new 18 mpg SUV. Not exactly a leap forward for the environment. Worse still, that Hummer and all the other clunkers then get shredded– thus destroying 200,000+ cars before their full use. Once you factor in all the pollution from manufacturing new cars to replace the prematurely shredded cars, it is unlikely you’ll see any net reduction in carbon.

    Cash for Clunkers Has Not Helped Consumers: New cars are not a consideration for many consumers. Many go straight to the used car market, especially in tough times. Taking 200,000+ cars off the road will reduce the supply of used cars. Economics 101 tells us that a decreased supply coupled with steady demand will lead to higher prices. Driving up the cost of older cars may be an intended consequence for policymakers to encourage people to buy new, but it’s a bad deal for consumers.

    Not Stimulating the Economy: The Obama administration claims that Cash for Clunkers will stimulate the economy by increasing new car sales this year. But the CEO of Edmunds.com, a new and used car sales website,  notes that the program will not increase yearly car sales totals: “The 200,000-plus deals the government was originally prepared to fund through the program’s Nov. 1 end date were about the ‘natural’ clunker trade-in rate. … We have crammed three to four months of normal activity into just a few days. What everyone fails to realize is that once this backlog is met, interest in the program will fade.”

    Economists looking at Clash for Clunkers are having New Deal deja vu. UC San Diego economics professor James Hamilton blogs:

    One of the more embarrassing features of the New Deal was the Agricultural Adjustment Act of 1933, which paid farmers to slaughter livestock and plow up good crops, as if destroying useful goods could somehow make the nation wealthier. And yet here we are again, with the cash for clunkers program insisting that working vehicles must be junked to qualify for the subsidy.

    The only thing Cash for Clunkers has succeeded in is wasting $1 billion of tax payer money in record time. No wonder Obama has declared it a success “well beyond our expectations.”

    Posted in Economics [slideshow_deploy]

    24 Responses to Is This What Passes for Economic "Success" in the Obama Administration?

    1. Jim in Wisconsin says:

      Don't be so hard on Obama.

      Remember, he inherited all those clunkers from the previous administration.

    2. Bobbie Jay says:

      The president PUNISHES the productive and SPOILS the unproductive.

      He doesn't show to know the difference between right and wrong or good and bad. What works and what doesn't, he is ignorant to.

      Everything he is doing is set-up to create more crisis.

    3. Pingback: » Financial News Update - 08/03/09 NoisyRoom.net: Where liberty dwells, there is my country…

    4. L.Krug.Rockville, MD says:

      My "take" is that the Cash for Clunkers program is one of the best programs offered by the federal government in years. I am a senior citizen, 71 years old, living on social security and driving a 20 year old vehicle I bought in 1989. I've been shopping around for a used vehicle as a 20 year old isn't going to last much longer. Used cars are expensive. With the Cash for Clunkers program I can get a new car – the one I want – for $17,000. Minus the $4,500 from the program, I can afford it. Yes, Cash for Clunkers is helping the auto industry; its helping auto dealers, when other businesses need help too. But even more importantly, its helping me… an average American citizen who pays in taxes every year… and many other people just like me. That's why the program is good. That's why the program is working. That's why the program should be extended with additional money (which has already been allocated to the Dept of Energy). Nobody should be against this program; and, particularly Senators McCain and DeMint and others who I assume can go out and buy a new car whenever they want to. Well, I can't. Sermon over.

    5. Frank in NJ says:

      Without taxes there would be no government. The only money the government has comes from tax payers. The Cash for Clunkers "cash" comes from our own checkbooks!

    6. Greg Va says:

      Just where in the constitution of the United States of America does it say that the government can take money from me and give it to someone else to buy a car. This is absolute insanity and unconstitutional. Does anyone care anymore that the country going to hell in a handbasket

    7. Dave Chelsea, MI says:

      L. Krug – you thought an affordable, good used car was tough to find before — As stated above, the Government is paying too much for these used cars, and then require each to be destroyed within 48-hrs of trade-in. Who in their right mind pays hard cold cash for an asset and then turns right around and destroys the asset purchased with the hard cold cash? Oh that's right – Team Obama and the Leadership in both Houses…….

      If not selling these cars domestically to help the financially disenfranchised, why wouldn't we have provided these "good" used cars for export purposes where those vehicles just might provide a leg up for someone trying to climb out of poverty AND to offset the total cost of Cash for Clunkers? If not selling the usable vehicles outright, why would we not have dismantled them and sold the parts to folks that can't afford a new car, but do need to repair the vehicle they depend upon to provide for their financial security?

      There is NOTHING good about this program – other than continuing the precedence that our Government will pick and choose winners in the market place (some auto manufacturers, some banks, some insurance companies, some etc.,etc.etc.) — Or, has the "Cash for Clothing" program been announced where we will bail out retailers that sell new clothing —- we'd probably have to shred any clothing traded in…we wouldn't want used clothing assets to fall into the hands of the poor……

    8. Tim AZ says:

      You could by a used car that's still under warranty and get as good or better deal than Mao-Bama is offering. You need a better argument than that. It's all drapes and mirrors I doubt this scam will last long after the next election. And I doubt it will destroy enough cars fast enough to impact the used car market. And there will be a percentage of these cars returned to dealers because of in ability to pay on the buyers part. Simply because they thought they got some free money. Some of them intend on doing that before they arrived at the dealership anyway. So there will be a flood of new used cars hitting the market in a year or less. If you need to replace your car just be patient. How's that hope and change working out for you

    9. Jill, California says:

      Cash for Clunkers sounded enticing … until I thought about the consequences of accepting any kind of "bailout" from this administration.

      Time and time again, we've seen how the recipients unknowingly sold their souls to the Devil.

      Consider how the banks couldn't return TARP money when they wanted to. Consider how companies were vilified for giving bonuses … obscene bonuses to be sure, but bonuses established by contract. Consider how GM's CEO was canned.

      Would a newer car be nice? Sure. But at what cost? How badly would I have sold my soul to the Devil if I participated in Cash for Clunkers?

      I don't have the answer, but I think Glenn Beck is on the right track. He broke the story that the federal government is using the program to tap into the dealers' computers and gain access to all the information in those computers, including information on those who participate in Cash for Clunkers. This is federal wire-tapping on steroids, with no legal basis.

      No thank you. My older cars are just fine until I can afford to buy something newer with my own money. I won't sell my soul to the Devil.

    10. Box says:

      Krug, I'm glad Obama can provide you with a new car..right before he helps you end your life with the new Healthcare plan. Yes, Krug, you now have been labeled a "Clunker" by Obama. I'd rather have seniors around and healthy than another wasteful government plan ending the life of a useful car and then useful citizens.

    11. Jerry from Chicago says:

      There is no end in sight for what this administration will do to keep taking money out of our pockets. Cash for Clunkers? Please.

      We bail out the UAW (by bailing out GM and Chrysler) with our tax dollars and if that isn't enough, we now need to bailout the government auto makers by giving people $4,500 to trade in their old cars on new ones. Everyone of these "deals" results in one thing – more taxes.

      Our Congress and Senate have become an oligarchy, too important to actually work at their jobs (for which they are highly compensated in terms of salary, insurance benefits and pension) and too smug to think that their constituents know what's best for them. These people do not represent us; they represent themselves. They sell themselves, like prostitutes, for personal gain. If you doubt this, look at how many Congressmen/women become employed as lobbyists as soon as their terms expire. Look how many of them have spouses and children who are employed by lobbyists while they themselves sit in Congress. If ever there was a need for term limits in the House and Senate, now is the time. And they continue to sneer at us when we try to take them to task and hold them accountable for things lke reading legislation before they pass it.

    12. Gary- General Delive says:

      Reagan got a MUCH more damaged economy from Smilin' Jimmy Carter. He loosened up taxes, allowing the entretrepreneur spirit of the free people reign supreme, and voila recovery. The most chilling statement I've heard from Obama was that the so-called economic stimulus program, "was right on target, doing exactly what it was designed to do?" If that design is from Bill Ayers and his spiritual advisor Jeremiah Wright, we in deep do do folks. If Obama's "change" is to turn this nation into a third world Marxist Dictatorship, well he's right, "it's right on target."

    13. Lynn B. DeSpain says:

      Nothing.

      Hozro

    14. Thomas, Anchorage, A says:

      This program is flawed because it lacks understanding of the automotive industry, primarily where the money is made.

      The workers on the assembly line are paid to build the car, whether there is a customer for it or not. C for C has no effect on them.

      Once the car is delivered to a dealer, the dealer is paying the OEM for the car until the day it's sold. Net profit from the sale of a new car is miniscule once the cost of having it on the lot for a day/week/month/year is considered.

      If or when the car the returns for service, then the dealer earns some coin on parts mark-up and labor. Ditto for the body shop.

      If the used cars were traded in, as they would have been eventually, the dealer would flip those for a tidy profit with little overhead. Used car sales are what keep dealers afloat (with some help coming from parts/service).

    15. Suzanne, Mississippi says:

      ditto to Gary

    16. Rick from Utah says:

      obama is a clunker!

    17. Victor, Chicago says:

      Krug,

      You are not who you say you are. I don't believe you. You're speech about the poor old man is intended to try to break my heart. You are probably a lazy 26 year old that doesn't want to work and is trying to legitimize the governments action to steal my money. Go buy your own car! I work hard for my money and quite frankly I wouldn't give you the sweat off my balls.

    18. Pingback: AntiObamaBlog.com » Taxes for Clunkers: Worst Governmet Program Ever?

    19. Dennis A. Social Cir says:

      Sicialism at its best, and obama at the head of the pact.Wake up people and smell the BS, it grows and stinks more by the day.

    20. Todd Darst Buckner, says:

      This administration continues it's, {the democratic party} Politics of Destruction which began with FDR's "new deal" that stole billions of dollars from American families and individuals through a Social Security plan that is, and has been bankrupt.There were no cautions introduced into this "plan", so our senators and congress people have robbed funds from this taxpayer"bank" to pay for much of their "pork for the people" initiaves.

      This same democratic party was mostly responsible for, and continues to stand behind the murder of millions of American "unborn citizens" while granting citizenship to all babies born in the United States…many of whom do not have the ability to pay for the medical costs assocciated with the birthing process.

      This administration not only revives a law to require that the American taxpayer pay for abortions outside this country, but authors itself to determine the length of time that it's senior citizens may have REAL access to, currently acceptable medical proceedures.

      I encourage ALL real Americans to tell their Senators, Congress People, as well as the person who currently ocuppies the White House, Mr.Obama, that his party, and himself,are operating outide the limits of HIS and THEIR, collective pay grades.

      Government does NOT have the authority to determine who gets to live, and who should die!

      todd Darst

    21. Ben Franklin says:

      Like Krug, there are many people out there that probably think such and so program is "GOOD" because they personally benefit from it. They forget that the cost of that program is covered by someone else. Getting something for nothing is always good for the one getting the something, but not so good for the one from whom the something is gotten.

    22. Alan Pitts, Minneapo says:

      L.KRUG.ROCKVILLE,MD, your comment on how the CFC program is helping you shows just the problem in America. You have no shame in taking my money to buy your car. I hope your children and grand children are proud of the freeloader example you are setting. I'm sure they will turn out just like you and I'll put some money aside for them as well.

    23. JRL, Atlanta says:

      LKurg you make me sick. You have used money stolen from to to get a new car – shame on you and your parasitic mindset.

    24. Katherine Tate - Jac says:

      It's FDR all over again

      yes, JRL of Atlanta – PARASITES are the only types that benefit from this – at everyone else's expense.

      It's insane for the government to entice people to buy a new car – then proceed to destroy perfectly good "clunkers" just to artificially inflate the market.

      The negative consequences of this ill-advised government intervention power-grab-in-disguise program will ripple throughout the industry for years-

      FDR's programs crippled us so badly – we are still paying for them.

      Does anybody up there have ANY SENSE?

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.

    ×