Sunday, August 2, 2009

Cash for Clunkers, Success or Flunkers?

Working in the car industry I just got a small taste of how the Government can jump in, manipulate the masses and still define their own action as a success.

Recently the Government came up with the idea of CARS. The Car Allowance Rebate System would help stimulate the economy and get older, crappy, gas guzzling cars off the road. Dubbed "Cash for Clunkers", the program was approved by our government to run for 3 months or for the first 250,000 customers that took advantage of the offer to trade in their old car for a guaranteed 3500-4500 rebate. This of course after the consumer paid their sales tax on the pre rebate number of. This program, with it’s potential 3 month lifespan, came with a budget approved by our representatives of 1 billion dollars.

What was supposed to start on July 1st of this year didn’t go into effect until July 24th. What started on July 24th was the grossest display of greed I’ve seen in a long time. What could have been 3 months of this greed was surely not going to be the case though. The budgeted 1 Billion dollars ran dry in four. Not months, but days. Four days of the Government getting into the Car Sales Industry they went bankrupt. Zero dollars left but they may pass another 2 Billion into the kitty so the “Clunker” program can get to that November 1st mark originally “budgeted” for. My math calculates that 2 Billion to potentially last another 8 days if the first wave of wasted money was a sign but who am I right?

”Was this program a success?” is what I’ve been asking myself. When I immediately say “yes” I know I only speak for myself about myself. The fact is, it was quite successful for me. The cynical part of me thinks that I made an awful lot of my own money back though. Since the government has always taken close to 30% of mine, them creating a system that directly affected my paycheck so positively is me getting them back.

But again, was this a success? My immediate answer was yes, but the bigger picture tells me it was just another system proving itself positive of how big a scale the government can screw up on.

For starters, the fact is the braniacs that passed this program budgeted our tax dollars to last 3 months and it only lasted 4 days. That is unacceptable by any and all standards. If that isn’t a big enough stick in the side, I look at the people that took advantage of this program. Now I don’t know the official numbers but I know what I saw. Most of the people that purchased new cars traded in their second or third cars, their kids cars, or cars they just had for rainy days. These cars that were on the road were not on the road often, they were really just rusting backups in peoples stable. Many of the people that traded in these cars did so because they were frugal or more accurately cheap. It wasn’t because they didn’t have the money. Of the 250,000 new cars sold I’d be really curious to see how many bank loans were written on them. The people I saw and heard about were paying cash. Tens of thousands of dollars that people are sitting on because they haven’t had a need to make payments on that antique 6 year old car they had laying around. They had salaries well above most Americans but now they were in the market because they found a way to screw a government that literally went out and asked for it.

The government bought cars that were worth $1- 500 bucks on a good day and paid 4500 dollars for the privilege. They then turned turned around and crushed them. Forgetting the fact that there is an ENTIRE viable used car, salvage, repair, and restoration industry that could have used the vehicles for their own inventories for less fortunate people to buy up and use. It’s not the green approach but sometimes people have so little that shouldn’t even be a concern of theirs right now. What about countries around the world that could use vehicles and how our throw aways could have helped them? How about the technology that we now have that could have converted the old power trains in these cars to be more efficient. Perhaps they could have been retooled by professionals and reused for the better good. Really, did anyone think anything out on this? No ideas in this at all but 1 Billion dollars (with another 2 Billion on deck) for a program where our government spends our money to save 750,000 people in this country a few thousand bucks on a car they probably didn’t need. If 750,000 people doesn’t really bother you, think about this… We tax payers just helped every citizen of Fort Worth, Texas to buy a car.

Did this program make any substantial change to the economy? Car sales people are living large but are you?