When I originally heard about the $1 billion CAR Allowance Rebate System (CARS)--or more commonly known as the “Cash for Clunkers” program--I was pretty interested to see how it works. So before I begin my rant, here’s a quick education for those of you who just don’t know about it or have been deprived of outside contact, over the hill and through the woods at grandmother’s house:
Increments of $3,500 or $4,500 rebate incentives are given to Americans to trade in their ancient eyesores of cars that pollute our roads and general environment. The official cut-off for qualifying lies with any automobile that’s still running, newer than 1984 models, and averages 18 MPG or less. The cars the campaign aimed for are typically worth around $4,500, so don’t feel too lucky. What happens is the old car is traded in (and eventually destroyed by the dealership) for its decrepit value, provided by the government-funded cash back rather than from the dealer--and this rebate can only be spent towards the purchase of any brand-new, more fuel-efficient car. To qualify, new automobiles must average 22 MPG or better, and be less than $45,000. The higher amount ($4,500) is dealt out if the new purchase is 10 MPG better than the previous car.
Sounds convincing enough at first glance, right?
At first glance, it could be considered a success. Many Americans drove their wheezing, gas-guzzling “clunkers” up to the car lot they had been eyeing for awhile, now even more motivated by that quadruple-digit cash back guarantee. The American populace was tapping into this in an undeniable way; it was an overwhelming hit. It was reported that the economy has, in fact, been stimulated by the massively-successful program, as Washington had hoped. Some even go as far as deeming this Obama’s greatest policy ever.
Okay...perhaps initially. But here are the facts in numerical form. CARS sparked a 2.2% increase at American-born Ford, the first year-to-year increase for the company in almost two years. However, American-based General Motors dropped 19% in sales compared to July 2008, even though sales have spiked 8% since this June. American Chrysler also reported loss at 9.4% this month, as drops were expected of all the American automakers. Foreign companies Toyota, Honda, and Nissan additionally fell in year-to-year sales. Besides Ford, only Korean automaker Hyundai actually went up in sales since last July, with its 12% increase.
Even with these solid statistics, there’s an issue: American automakers obviously have no gaping advantage, even with the huge helping hand of the oh-so-infallible American initiative, exhibited through CARS. When trading in their “clunkers,” Americans are mostly buying foreign-made vehicles with the "clunkers" incentive money: the most-sold in the U.S. this week were foreign-made Honda Civic’s and Toyota Corolla’s, Prius’s, and Camry’s (with the exception of the also popular and homegrown Ford Focus).
So there goes the whole “‘Clunkers’ is great for the economy!” myth. Ooh, sorry. Better luck next time!
While reading up on the subject, I came across something that Democrat Debbie Stabenow, U.S. Senator, said: “with over 200,000 cars sold, thousands of employees on the job serving customers...and sales tax income flowing into struggling states, CARS has injected money into communities across America.”
If you’re still reading this, allow me to dissect this statement, ladies and gents.
First of all, the “thousands of employees on the job serving customers” creates an annoying little blip on my radar. The last time I checked, the national average for unemployment was nearing double digits at 9.5% (June 2009); it’s probably safe to say that the American work force isn’t exactly flourishing right now. It’s also a little eluding to say that these car salesmen have such solid careers. In the week before CARS’ launch, these same now-bustling employees were undoubtedly dreading inevitable lay-offs their companies were making in massive amounts because they had--and still have--a diminishing income to pay their employees with.
Second of all, exactly where is this money flowing from? Obviously if national unemployment rates are nearing--and many states already are above--double digits, We The People just simply have no money to spend on new cars. That's really not so hard to compute. Also, with the economic state so terrible and banks so wary to give out loans for The People to buy said cars, there is definitely no way that citizens' finances can hold their heads above the current. Insurance rates are flying through the roof in a time of economic instability such as this, so making car payments and purchasing insurance is out of the question for The People, too.
“Cash for Clunkers” has pushed many to trade in their shabby old cars, get some cash for a better car and ultimately help out the economy and feel good about the environment while driving home, intoxicated by that new car smell. Kudos for that, America (if you can actually afford a brand-spankin'-new hybrid with the cost driven down ever-so-slightly).
However, many of the citizens who took advantage of this program are people who may not have been planning on trading in their cars and/or buying a better one this year. What this leads me to is the golden question: What’s next? What happens when the current $1 billion fund runs dry?
Well, Transportation Secretary Ray LaHood said Saturday on CBS, “Don’t worry. Go out and buy a car.”
Uh... Is that a direct order, sir?
The vital inquiry that these politicians can’t ignore now is that if the vast majority of Americans trade in their “clunkers” now to supposedly boost our economy, then who’s going to do it after they’re done? Without a promise of such a valuable rebate to keep the momentum, I’m going to go out on a limb here and guesstimate that these automakers will see the same turnout number the struggling auto industry had been receiving shortly before this program launched. This would translate into the aforementioned “stimulated” auto industry shrinking back into its previous ditch, bruising consumer confidence and--who saw this one coming?--our economy on its way back down.
Via Twitter, Democratic Senator Claire McCaskill said, “We simply cannot afford any more taxpayr $ to extend cash for clunkers. Idea was to prime the pump, not subsidize auto purchases forever.” (Yes, she spelled it "taxpayr," not taxpayer. Don't get too anxious; she's only from Missouri)
Agreed. Even if the Senate does give the House legislation the go-ahead for an additional $2 billion for CARS (which they probably will), I similarly ask: What’s next? Another $10 billion? When and where will Congress draw the line? What we face is the first half of our legislative branch giving the thumbs-up to spending excessive amounts of America’s tax revenue on endeavors that have no guaranteed result, nor are yielding anything significant once implemented. And remember that a stimulus is only the spark of an ensuing economic fire; as McCaskill tweets so eloquently, this was to give the business a boost, not hold them up until the government’s arms--or funding--ultimately became exhausted.
Apparently, our government doesn’t know how to fix this darned economy problem without draining the lint-filled pockets of its weary taxpaying citizens. It’s like that terribly apparent bug on your windshield that you’ve tried to windshield-wipe-off for weeks, but it just won’t go away.
But maybe, just maybe everything is actually going to work out dandily; American society doesn’t seem to get it yet either, so at least lord and vassal are on the same page. “To me, it’s a big waste of taxpayer money,” Alvin Lee, a California car shopper told CBS Radio. “But if it’s there, I’ll take it.”
Stimulating, indeed.
Relatedly, this video casts it in a bit of a funnier light. Freakin' baller:
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