Is Cash for Clunkers a Waste of Money?

[Right Lane Cruiser]

Some Critics Argue That the Government Could Do Other Things to Stimulate the Economy

Scott Mayerowitz - ABCNEWS - August 4, 2009

It may be too early yet to tell. --Ed.

The government's Cash for Clunkers program has been a big hit with consumers who have jumped at the ability to get up to $4,500 of a new-car purchase, helping to clear cars off deal lots.

But as the Senate now considers adding another $2 billion to the initial $1 billion for the program, some are questioning the benefits of this program for the larger economy.

Sure, Cash for Clunkers has helped the automakers, but what about helping to stimulate the nation's economy and end the recession?

"This proves one thing: If you hand out money on the street corner, people will take it," said James L. Gattuso, a senior fellow in regulatory policy at The Heritage Foundation, a conservative think tank.

He warned that while people might be buying cars the gains from their purchases won't overcome the lost economic activity from using the government dollars for more productive programs.

"The money has to be taxed or borrowed. It doesn't come from thin air," Gattuso said. "You aren't going to fix the economy by the government being the consumer and paying for consumption directly.

"Is the government going to be the consumer of last report?" Gattuso added. "I don't think that's a viable economic plan."

Supporters, however, say the program is just... [Read More]

[SentraSE-R]

A 61% increase in FE is nothing to sneeze at. Plus the spending trickles down into many other industries.

[MT bucket]

just another bailout in disguise imo

[phoebeisis]

"Consumer of last report" -"last resort" maybe this is just a misprint. I think maybe they use some sort of computer speech recognition programs-like on closed caption TV programs-to "hear" these and reproduce these statements.


Of course this is another bailout-and it isn't disguised at all.Wasn't the stated purpose to increase auto sales with a slight nod to FE?

cHARLIE

[Doofus McFancyPants]

i do not have "Clunkers" I made smart choices. Now i, once again, get to PAY for the people who made poor choices.

And if i may be so bold, i am sure the vast majority of those here have tried to make the SMART choices as well.

YEA US !!!

[Earthling]

http://www.cnn.com/2009/POLITICS/08/...ers/index.html

Government policy should not favor some industries at the expense of others, but that is exactly what cash for clunkers does. The program helps consumers who can take advantage, and it increases profit and employment in the auto industry. But funding for the program comes from all other taxpayers, so it harms the consumers and industries not supported by the program.

Thus cash for clunkers creates winners and losers based on political considerations, not economic values. Whether or not government spending is a good way to stimulate the economy, the specific kind embodied in this program is misguided because it distorts the economy's allocation of resources across consumers and industries.

Any spending stimulus, of course, tends to favor some sectors over others, which is one reason stimulus is better accomplished via reductions in tax rates, not increased spending. Tax cuts improve the incentives to work, save and invest, thereby making the economy more productive going forward. Reductions in tax rates are neutral across sectors and therefore let private valuations of costs and benefits -- not political connections -- determine winners and losers.

Cash for clunkers is therefore just redistribution to certain consumers and to the auto industry; it is more bailout dressed up as environmental policy. Congress should end the program, not expand it.

Harry

[WoodyWoodchuck]

I do not know if it is a waste of money, I do feel the mpg upgrade was nowhere near enough to make a difference, except on paper. It is a government handout plain and simple. Nothing that benefits me directly but I am paying for it and hopefully will see at least some return on my money. If I had children they would be paying for this too.

I also am very disappointed that my government approved double the original amount so quickly. No company in the world would have done this without analyzing the results from the first offering. Did it work the way they wanted? What was the actual cost versus the benefit? (yes, I realize this is government and this means little to them). Is 2 billion dollars more enough or too little? Were there any major loopholes that need to be fixed? I feel there should have been a month, at least, wait to take a look at the results before just blindly going ahead with the program. The program regulations were already what… 100, 400 or 1,000 pages long so what difference would a few hundred more pages of rules for the second go-around matter. All I can ask is to try and get it right not just keep doing stuff because it might help the economy. Dumping good money after bad makes no sense to anyone; it only makes many of us angry.

Just read Harry’s post and agree. Tax cuts would be the way to go but then our fine government would have to cut spending and live within their means and that is not how things work in Washington.

[SentraSE-R]

I feel like I'm in the Twilight Zone with a bunch of Conservatives . Tax cuts for the rich didn't stimulate the economy under Bush/Bush/Reagan. They just redistributed the tax burden from the rich to the middle class, and battered the economy in the process.

As for bailouts, government spending is what it took to get us out of the Great Depression. It's not necessarily bad. I fully expect the CARS program will be cited in textbooks as the stimulus that turned our economy around.

[Daox]

Originally Posted by Doofus McFancyPants

...I made smart choices. Now i, once again, get to PAY for the people who made poor choices.

My thinking exactly.

[mparrish]

Originally Posted by Doofus McFancyPants

i do not have "Clunkers" I made smart choices. Now i, once again, get to PAY for the people who made poor choices.

And if i may be so bold, i am sure the vast majority of those here have tried to make the SMART choices as well.

YEA US !!!

The idea of cash for clunkers is just a proxy for what one thinks of peak oil & climate change.

If the finite limit of oil is upon us and climate change is a serious man-made threat to be mitigated, then cash for clunkers is the babiest of baby mitigation steps needed to get the ill-informed to conserve.

If the above are not occuring, then it's a waste of time.

So it again comes down to your opinion of global oil supply and climate consequences.................which we've discussed quite a bit.