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  • Cash for Clunkers: This is What We Call Success?

    Politicians are touting cash for clunkers as a successful program that has killed two birds with one stone. By handing out taxpayer money to subsidize a portion of the cost of a more fuel efficient vehicle, the program is saving the economy and saving the environment.

    Although the program increased consumer spending and increased fuel efficiency, the question should be: At what cost? It has been a bureaucratic nightmare laden with unintended consequences. And despite all its ‘success’, GM and Chrysler’s sales in August from a year earlier fell 20 and 15 percent, respectively.

    Sure, the government was successful as spending $3 billion in taxpayer dollars, but when isn’t the government good at spending other peoples’ money? Unfortunately, the government hasn’t been so great at transferring the money affecting the cash flows of some of the dealerships. A few examples:

    One owner quipped, “I have not gotten one dollar in reimbursement. I have $300,000 or more dollars out there that Uncle Sam owes us. If they screwed up this program so badly, I wonder what our health care system will be like.”

    Lou Tornabeni of Ettleson Hyundai said, “Out of 142 deals they owe us for, we’ve gotten paid on seven.”

    And Carm Scarpace of Westfield Ford remarked, “We had 102 cash for clunkers. We’ve been paid for one.”

    Then there’s the alleged environmental benefit. California-Berkley economist Christopher Knittel estimated the costs of the reducing carbon dioxide from cash for clunkers. Mercatus scholar Bruce Yandle summarizes the methodology and the findings:

    “Knittel made plausible assumptions about the average life remaining in vehicles removed from the road, the average fuel economy associated with those vehicles, and the resulting levels of carbon emission that would have survived in the absence of clunkers. Eventually, of course, the clunkers would have died a natural but less dramatic death. Knittel then estimated the carbon reduction gained when the large fleet of clunkers was replaced by a new fuel-efficient fleet.

    When he ran the numbers, Knittel found the cost per ton of carbon reduced could reach $500 under a set of normal values for critical variables. The cost estimate was $237 per ton under best case conditions. And what does this tell us? The much celebrated Waxman-Markey cap-and-trade carbon-emission control legislation estimates the cost of reducing a ton of carbon to be $28 when done across U.S. industries. Yes, we are getting carbon-emission reductions by way of clunker reduction, but we are paying a pretty penny for it.”

    Furthermore, we shouldn’t forget how profoundly wasteful this program is. Yandle goes on to say:

    Frédéric Bastiat’s brilliant parable of the broken window reminds us that a street hoodlum throwing a brick through a window generates a series of job-generating transactions that might raise GDP by a trivial amount, if it could be measured. Indeed, the idea seems so compelling that people today often speak of the silver lining found in the clouds that create hurricanes. Think of the roofers that become employed. But Bastiat’s key lesson is that a window has been destroyed—and it had value. Before touting the total benefits of clunkers, we must take account of the destroyed vehicles and engines that represented part of the wealth of the nation. As Tony Liller, vice president for Goodwill, put it: “They’re crushing these cars, and they’re perfectly good. These are cars the poor need to buy.”

    Instead of killing two birds with one stone, cash for clunkers simply has killed hundreds of thousands of engines  for no real good reason.

    Posted in Economics [slideshow_deploy]

    41 Responses to Cash for Clunkers: This is What We Call Success?

    1. DANA, NEW MEXICO says:


    2. Bobbie Jay says:

      Good example of why private business should never consider holding hands with government.

      Because of their shameless failure, they call it a success as those easily influenced will believe.

    3. GLEN MOWREY GRAHAM, says:

      All that steel can be used to build bridges and roads.I see a WONDERFUL future for America. I hope to see more positive news and an end to all the negative stuff from sore losers. Thank God for a bright hope and a leap into higher consciousness.

    4. Whicket Williams Kin says:

      We are squandering the freedom our fathers died for Who will Stand up? Will you shake of the apathy and ignorance that brought us to this? " NEVER RE-ELECT AN INCUMBENT" If they are in Government, they are responsible for this! Do not buy that old lie, THE OTHER GUY DID IT! That is why we are here now, we buy the lies!

    5. Mark, Kansas says:

      All that steel could have been used for bridges at any time during the normal life expectancy of an automobile. That the steel will be available this year rather than at some future point when the automobile would have normally reached the end or it`s useful life does not outweigh the additional costs associated with paying up to $4500 of taxpayers` money for the steel in one automobile over the normal price of fresh steel created from iron and coke. The steel derived from these formerly useful automobiles will have a higher significant per ton cost.

      Spending more of the taxpayers` money to acquire a service or product that`s available at a cheaper price somewhere else is poor stewardship. I have higher standards of our elected officials than to tell me that destruction of perfectly good automobiles is a benefit to our Nation and economy.

    6. Thomas, Utah says:

      GLEN MOWREY GRAHAM, NC writes:

      To Glen

      I love when people point fingers and say how negative people are being about this government operation. I remember when New York dealers decided in the end to not offer "Cash for Clunkers" as they were afraid they wouldnt be paid or paid timely by the Government. I remember hearing Obama on a news conference basically telling the dealerships to stop complaining as they will get paid. I guess Mr. insensitive Millionaire president doesnt live in the real world of having to pay your bills on time. I always think it is funny when the current administration is so negative of the last, but gosh forbid the dealers complain about not getting paid back timely….Next time you think others are being negative-look how you are complaining about the people being negative. Doesnt it make you negative to complain?.

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    8. Pingback: Cash for Clunkers: This is What We Call Success? » The Foundry | Cash For Clunkers

    9. Sean, Charlotte NC says:

      This truly is not suprising to me. I'm not an economist by any means, however I could see failure written all over this program.

      Aside from what was outlined above, the used car market has been stripped of a few hundred thousand potential sales, the used part market has been stripped of a few million parts, and these are both equally valuable industries within our economy.

      This also makes me wonder how many people went out to buy cars who shouldn't have been doing so (kinda like the sub-prime mortgage) and are going to have them reposessed within 2 years.

      It's sad that those who blindly follow this type of leadership can't see the larger consequences. It's even more sad that people believe the government is the answer to the economy when those in power are those who should be held accountable.

    10. Bob Kassebaum, Palm says:

      Let's see, the program cost three times what the D.C. yahoos forecasted. People traded in cars that were both paid for and running in exchange for a car payment and higher insurance costs, thereby raising their debt levels. I think I recall a similar strategy of a home for every person enhanced by government backed loans at Fannie and Freddie leading to a problem or two. Chysler and GM saw sales fall dramatically so the Detroit bailout is working. The cost per ton of carbon was slightly underestimated. Yep, sounds like another example of why the government should control all industries and we should abolish the free market system.

      Wake up folks, the problem is systemic of both parties. It's time to vote out the idiots in D.C., enforce term limits, demand that elected officials limit spending to tax revenue levels a.k.a. a balanced budget, demand the politicians not only read the bills before voting but have open and frank debates like our forefather's practiced and envisioned for this country, disband rewarding mediocrity and complacency, and adopt a Fair Tax program. God bless America and the citizens who contribute to the strength of this country, especially our military.

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    12. Robert Kennell says:

      We are destroying the cars that are paid for and have no monthly debt burden and replaced those with $400 monthly bills for the new car buyers. I think the Government wants us all so dependent that we run screaming to them for help.

    13. GringoBob in La Tigr says:

      have you ever paid taxes GLEN MOWREY ?

      do you not understand about the radical marxist takeover of america, or is that OK with you too ?

      our voting matrix – http://Group912.org

    14. Ken St Louis says:

      Sadly, all this brings me to the remembrance of that old saying: LOOK OUT WHEN THE INMATES START RUNNING THE NUT HOUSE! So much for ALL the morons in congress. WE NEED TERM LIMITS BAD! AND the moron in chief in the WH needs to be impeached!

    15. Judi in Pennsylvania says:

      The auto dealers should not "Crush" those clunkers until they receive the "Cash". At least they could try to sell them at a later date to recoup some of the money they lost.

    16. Brenda, Arizona says:

      GLEN MOWREY GRAHAM, NC writes:

      All that steel can be used to build bridges and roads.I see a WONDERFUL future for America…….all that steel is going to China it is not staying here!!! That is what makes this program such a farce. They demolish these cars that where running, dispose of the engine, sell off odd parts and ship the metal to another country how is that helping this country out????

    17. John E. Walters, Hou says:

      I am only surprised that within all these comments, no one has noted that the actual cost is greater than the $3B that the government gave away. We also had to pay government employees who are handling the paperwork. Or, if using current government employees, assuming they were all just sitting around doing nothing productive, is then the best exepnditure of our money in this whole mess.

    18. Bob, Portland, OR says:

      Robert is right. One of the issues Mr. Obama campaigned on was that americans have too much personal debt. Now they have more.

      Those old cars should have been kept around for the people who can't afford the new ones. Like for example, college students, single mom's, layed off workers', old people, you know, the very people he cares about.

      It is amazing how easy it was for Mr. Obama to spend 3 billion dollars on cash for more debt and yet how difficult it is for him to release water to the California farms.

      Curious isn't it.

    19. Lloyd Scallan - New says:

      Glen Mowrey, are you completely brain dead? That steel, from many viable vehicfles, is NOT being recycled and used here in the U.S. It's going overseas, melted down, the sold back to the U.S. at inflated prices. People with your mental capacity should not be allowed to vote or reproduce.

    20. Amy says:

      I have heard, from friends in the car dealership world, that they have to take out the radiator and another item and then the car has to be crushed so that parts cannot be used. These crushed vehicles will then be shipped to China for thier use. I have personally seen many good vehicles turned in. We choose to drive older model vehicles because of the cost savings over purchasing a new vehicle we can't afford. Now the market is depleted of good older vehicles. Did they really think that those who had falling apart vehicles were going to turn them in and be able to pay for a new one? No, the people who turned in thier vehicles had the resources to purchase a new vehicle and took the truck out of the 3rd car garage and turned that in. Wanna help someone? Make THOSE vehicles available for people who are without jobs and have poor running vehicles. What would people think if there had been a cash for clunckers in the 70's and all these 30's,40's,50's vehicles would have been turned in. Then we wouldn't have a way to look back and remember our past accomplishments. How many car shows are there a year? We go to many throughout the year in different areas. When we fail to remember our past we are doomed to repeat it. I recieved an email explain the cost benefit from this joke of a program. We have spent 3 Billion to save $3million in fuel consumption a year. That means it will take more than a lifetime to recover the cost to use the tax payer on just those vehicles. Sounds a little lopsided.

      To those who feel there needs to be an "end to all the negative stuff from sore losers", please post positive things that Obama has done in the last 7 months. I would love to repost them or email them to friends. Let me know what you come up with.

    21. Hal says:

      How kool is it too, that it took 135 pages to explain the cash for clunkers trade in deals for a $3billion dollar refund program that still has deals waiting to be paid? I guess the good news is that the gov had to hire 1,000's of people to distribute and deal with the program. That's job creation. A government job. Which will be there indefinitely now. Hmmm. I wonder how many jobs will be created from the $3 Trillion dollar healthcare program.

      And how many trees will be killed to explain that one.

      I can't help but wonder at all that debt spending and the bubble that's being created by our FED and Congress. I saw some news yesterday that our biggest debt holder, China, was working toward shedding that debt and the dollar and going into gold. I just checked the widget I use to track gold, http://www.learcapital.com/exactprice , and that bit of news seems to have shaken the markets up and forced gold to a new 3month high.

      Keep up exuberant spending with healthcare, government. The next bubble is the dollar.

    22. Jill, California says:

      I had to chuckle when I heard that people who took advantage of the Cash for Clunkers program will be taxed on the $3500 to $4500 rebate, because the government considers it income.

      As much as I might like a new car, there was no way I was going to sell my soul to the Devil. I couldn't predict how the government would nail these folks, but there was no doubt in my mind that the government would do so … and may do so again.

      What I want to know is whether taxpayers have a cause of action against the government for violating the Takings Clause of the U.S. Constitution. How can it be legal for the government to take money out of my pocket to buy new cars and new refrigerators for other people?

    23. Larry, Little Rock A says:

      I'm waiting for some bright young MBA student to do an analysis of the entire program to demonstrate just what the total cost/benefit has been associated with the Cash for Clunkers Program. The government bureaucracy required to administer the program alone could torpedo it.

    24. StepIntoTheLight, Mi says:

      Government claims success, when all the evidence points to just the opposite:

      1. Program was funded with $1B taxpayer dollars to last up to four months, and does not last a week before the money ran dry.

      2. Congress rushes another $2B taxpayer dollars to fund this over-hyped program, and still runs out of money and have to cut the program early.

      3. Cars/parts that could have been sold in the resale markets are taken out of inventory, leaving people who could afford a used car/spare parts out of luck. Used car prices sure to increase as a result of depleted inventory.

      4. Claims of improved environmental impact is negated when you consider the real costs to replace the vehicle with a slightly newer model.

      5. Government CARS program was devised with an illegal computer access system, making anyone who utilized the program agents of the federal government — computers because federal property!

      Whatever angle you look at this program, you can easily see nobody wins except the government.

    25. curt L. Columbus, O says:

      Why are dealers shocked that the federal government is stalling payents?

      Frankly, I was shocked that dealers didn't opt out at the very beginning.

      Who is John Galt?

    26. James, Winterville G says:

      And how many of those who got the $4500 realize that they will be liable for income tax on it?

    27. James, Winterville G says:

      I stand somewhat corrected. Upon doing my own research, it seems that the money will be considered "income" for the dealerships, rather than for the individuals who bought the cars – at least insofar as the Feds are concerned. How the various states may treat the transaction is another matter altogether. Also, there may well be unforeseen tax consequences concerning those cars that were purchased for business purposes.

    28. Tim Az says:

      I'm sure we will be asked to bail out many of those who thought they were getting free money for nothing. When they attempt to return these cars because they are tired of the payments or just can't make them. The buyers higher consciousness will be rudely interrupted when The IRS comes calling. What Glenn Mowrey means when he talks of a higher consciousness is actually a deeper unconsciousness. Closer to a comatose state where one rejects reality and substitutes it with dreams of fancy. If one were living in a communist society this would be viable option. Right to the point of the bullet impacting the back of your head by the order of your dear government.

    29. John Saucier says:

      You're right – this clunkers program failed big time, so will most other programs coming out of Washington, which shows how bad our leadership is. I can tell you that I'm very sad to see where our government is taking this once wonderful country. Not a soul in the world wouldn't have loved to live here a few years ago. I'm very concerned that when these foolish leaders get though with it, there won't be a soul proud of America – land of the down trodden, home of the homeless and out of work masses – just another socialist country – probably ruled by a dictator. Beleive me, we're headed for a huge fall, thanks to our Washington crowd – and us for letting them do it. They ignore our unique constitution now, so what makes you think they won't totally trash it? Not a bit of integrity or character left in any of them. Just greed and false pride, without any care for the us or our grandchildren.

    30. Craig S, Seattle says:

      I decided to not participate – if dealers would have refused to participate instead of seeing $$$ in their eyes, it would have turned out different – as someone said, private businesses should think twice before getting into bed with the government.

    31. David Williams says:

      Two comments: First, a friend who had a 1991 clunker that is held together with duct tape and bailing wire did not qualify for the program because the one arbitrary factor that made the decision was mpg rating and his car still got fewer miles per gallon than the cut off. Needless to say he will drive it until it falls apart even if it burns oil and has a poor exaust system.

      Second, it will be interesting to see what the next three months bring in way of auto sales. If everyone who could (and some who could not) afford to buy a new vehicle with the government cash, who will buy cars for the rest of the normal buying cycle? When government mucks around in the free market system it screws it up every time. We haven't yet seen the totality of the failure of the cash for clunkers program.

    32. Lynn B. DeSpain says:

      There are those who go to the Casinos and hope to make the, "Big Jackpot", and there are those who go expecting to make, "a living." There are also people who go to carnivals and throw the darts, toss the rings, and aim the baseballs at the three bottles hoping to win a fuzzy bunny, and some do! What they don't realize is that even if they win the bunny, the bunny cost the Carney less than one quarter of the price to play! The same with the Casinos, they are in business, because the house is always favored to win!

      The people in Washington DC are no different in concept than the Casinos and the Carnivals, they bring you in with big (Almost) promises of winning, and you always lose. Big surprise!

      Wake up America, there is no such thing as a 'Free Lunch", no matter how well it may be explained that there is! Someone always has to pay for it, and if you cannot afford it, remember that those who can worked hard for the privilege of buying theirs, so never stop being grateful to them, never stop striving to be like them, and never accept the phrase that this is owed to you. Taking a 'Free Lunch" is just another way of stealing, only the Government is doing the theft for you.


    33. TGOTCB says:

      Cash for Clunkers only makes sense to those who received this new form of welfare. It will do nothing in the long run except increase the national debt and taxpayer burden. One of many transfer payments devised by Team Obama to pay off past, present, and future voter support. The man is the most corrupt poltician in American history who is destroying more than 200 years of hard work, sacrifice, and progress. Too bad he will have destroyed the country before the 2010 election cycle. The LibTurDems and their Marxist plan are in high gear.

      Civil unrest can't be too far away.

    34. Richard Fletcher, Sa says:

      Boy, another example of taking one person's money and giving it to another person. Where is the "truth-in-advertising" in this process?Of course,it isn't any at all but then again, which of these payout programs are?

      Another example of Obamanation!

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    37. A*CONCERN*AMERICAN says:

      Martin Jackson your article was not even journalism. I,m sorry , but I bet you can do better than this.

      If you saying that the Cash for Clunkers worked than you are in denial. Because it did not work at all. It was a complete failure. Well, I guess I can't say that. There are now less cars on the road that were gas guzzlers. And you were right about the program started because the Auto industry was losing business, but its not because they had to many cars in there lots. It was because the nation's economy was in a decline and nobody was buying anything. So the program started to help stimulate the economy , but Martin it only stimulated the economy for a short time. If the government is going to start a program that now has cost the U.S. taxpayer $3 billion, only $1 billion was put aside, but that ran out in days and a further $2 billion was added to the program. This figure is now about to run dry, which is why the program is now set to end on Monday.

      So this program ran itself into the ground. It didn't even get off its feet. It didn't work because now it is going to cost you and I; what 6 billion dollars now that the program lasted what only a damn week or two. The is not what I call a success, I'm sorry Martin . And Martin for future information, think in your head what government ran agency works well at all???

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    41. Johnathon Alston says:

      hi everybody

      great forum lots of helpful people just what i need can anybody tell me how they have built there list for people interested in marketing

      hopefully this is just what im looking for, looks like i have a lot to read Im trying to find a way to build an e-mail list.

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