Cash For Clunkers - The Final Chapter

I have been meaning to do this final post on Cash For Clunkers for a few weeks but other opportunities kept getting in the way. In previous posts, we reviewed how bad this program was. Like most rebate programs, it did not create much new demand, it merely shifted demand from one time period to another. The high level of car sales in the U.S. in August and the abysmal sales in September, after the program ended, proved that point. Thus, the American taxpayer basically gave $4,500 checks to their neighbors to buy a new car. By destroying the trade in sales, the government created a void in the used car market, forcing lower income people to either continue driving older, more gas guzzling cars or purchase a new car, a new car whose production required high degrees of energy and resources to be used vs. just buying a good used car. Both of these choices are bad for the environment, contrary to the avowed purpose of the program. Finally, the program logistics were a disaster from a processing perspective.

And as a final slap in the face, an article from the AP that appeared online on Earthlink's news page analyzed the sales results from the program. Highlights of their analysis included the following:

• The most common transactions of the program involved replacing old Ford and Chevy pick up trucks with new ones that barely got better gas mileage.
• The single most common deal involved Ford 150 trucks. People who brought in an old 150 were seventeen times more likely to just get another Ford 150 truck than a fuel efficient Toyota Prius. The new Ford trucks get about 2 MPG better gas mileage, hardly a significant environmental gain.
• The program spend more than a half million dollars on deals where the new vehicle got the same or WORSE gas mileage than the vehicle being traded in.
• One in seven of the sales the AP looked at got less than 20 miles a gallon.
• In at least fifteen deals, owners who traded in large pick up trucks got rebates to offset their Hummer H3 purchases, major gas guzzlers.
• A driver in Virginia traded in a ten year old Ford Explorer that gets about 15 MPG for a $28,000 Jeep Commander that gets 16 MPG.

Thus, another government program that fails to live up to its objectives:

• It did not significantly increase car sales volumes while it theoretically removed money from all taxpayers who could have spent it on other parts of the economy. Remember, the government does not create wealth or jobs, it merely takes wealth from taxpayers and redistributes it. Thus, the money that was basically given away to buyers to get a deal on a new vehicle may have been better spent by other taxpayers in other product categories.
• From an environmental perspective it was also a disaster. Many, many deals resulted in worse, the same or marginally better mileage performance. You have to question why the trucks and Hummers were even allowed in the program. If you want to make an environmental statement and impact, no vehicle with less than at least 20 MPG rating should have been included in the program.

And, as with previous posts, if the political class cannot even run a simple rebate program efficiently, who really believes that it can effectively run the health care industry in this country like the current House approved health care reform bill tries to do? Be scared, be very, very scared. Check tomorrow's post where we will review how the Cash For Clunkers government ineptness will be manifest itself in the health care industry.

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