From TheStreet.com Network
TheStreet.com's Jim Cramer says critics of the program don't understand the simple good it does.
The Wall Street Journal's editorial page launches an attack of the Cash for Clunkers campaign today, noting that we are destroying perfectly good cars for no reason and giving away thousands of dollars only to increase the federal deficit. We should give vouchers for all sorts of goodies if we are going to go down this route, they cynically point out, and they label it a Democratic giveaway.
First, let me say that if the government gives away $4 billion or $5 billion on this one, big deal. We have supported every cockamamie military project, every bogus part of stimulus -- ours amounts more to a giveaway to the only secure workers in this country (state and local employees) with a minimum of stimulus for infrastructure -- so what's wrong with one that actually mimics the successful Chinese program of forcing consumers to spend?
Second, we have kept the autos on life support, as GM (Cramer's Take) and Chrysler are gigantic welfare programs to keep people in jobs and avoid a further drop in employment. This program at least gives them something to do and something to make and doesn't just have them do nothing. The production of cars still takes a huge number of people, and this program has great spillover.
Third, this spurt in sales allows Ford (NYSE: F) (Cramer's Take), the most important auto company with the best lineup of fuel-efficient cars, to close its billion-dollar cash burn and do more refinancing and perhaps equity offerings to get that company to be the leading car builder, perhaps in the world. We should be saluting that.
Fourth, the environment will be cleaner. I still don't know what's wrong with that, as we should not presume that all cars turned in are at the upper limit of 18 mpg. We are doing something good against global warming, too. The Journal dismisses that part of the initiative, of course.
Now, it is true that it has a tinge of the Agricultural Adjustment Act in the New Deal, where we slaughtered animals and plowed fields to get prices up. Arguably a reprehensible program, but one that is widely perceived as allowing farmers to stay afloat in the Depression. This program is similar when it comes to the upper limits -- the destruction of 18-mpg cars for cars that are only slightly better.
We need quick stimulus, not work-through stimulus -- much of the money that was supposed to be spent from the big package hasn't been.
This one is a small cost to clean the environment and to purge the inventories for the car companies and to help lower unemployment.
It worked for the Chinese with their vouchers to spend, it's working here. What's the issue? Come on Senate, go make it bigger!
Jim Cramer is co-founder and chairman of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer had no positions in the stocks mentioned.
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Reader Comments (Page 1 of 1)
8-03-2009 @ 10:14AM
ebrandler34 said...
I just question the wisdom of each consumer who adds a $18K-$24K debt obligation in order to score a $3,500-$4,500 government rebate.
Sure, we want the American consumer to spend us out of this mess, but isn't excessive leverage what brought us to this point?
8-03-2009 @ 10:47AM
aliabassi1 said...
Come on Cramer your a smart guy, why the hell would anyone in a sober mind think this program is good? Its a massive pump and dump for car sales. When this program is over does anybody really think the boost in sales are going to be sustainable? On a second note, the plan is to trash the old cars! Not resell them, give them to the poor, sell them to third world countries or dismantle and sell their parts. This goes against the goal of cutting down on carbon and waste. Was the cap and trade program just a illusion?
Last but not least the program was invented, push by and currently being managed by Obama's czar who is openly a marxist!
WHAT HAPPENED AMERICA! WHAT HAPPENED CRAMER!
8-03-2009 @ 9:59PM
Diane said...
We spent $800 billion dollars to rebuild Iraq's hotels for the Iraqi recovery, why can't we spend a few billion dollars to prime the pump a little for the American recovery.
8-04-2009 @ 1:48PM
Ernest said...
Got my Cash for Clunker deal. I had a 2003 dodge ram with 142000 miles on it. My other car is a 2006 Nissan 350z both horrible on gas. I would drive my truck every day to work because the Z is my toy. My gas guzzler Dodge Ram was costing me 300 plus a month on gas. The Z is not a car for driving every day.
At first I was going to buy a ford focus to support an American dealer. The Focus ride nice and had lots of options. It was even good on gas. Then we got into price haggling with the Sales manager and he did not wand to do the sale for 500 less. I agree that I will eat the 500 because it still was a great price after all the rebates and incentives. I was all set to wrap the deal up and pick the car up on Thursday before the 24th which was the official day the gov program began. Thursday came I got a call from my Fords sales man to come Friday to sign. He also wanted me to fill out a credit app so I could get a better rate. I already had a blank check from a bank. So ether way I had the financing. That’s when it’s started to smell fishy. That Thursday Nissan call they had a deal on a Versa hatch back and to come look at it. Then I saw a deal for a loaded Nissan Sentra for a grand more than the Versa and 500 less than the Ford. Well I end up buying the Nissan Sentra. Ford loose out because they snoozed and was looking for an angle to screw me.
I have had my car one week and I am so happy I did not by the Focus.
American dealers are doom if they keep trying to nickel and dime the consumers.
By the way I drove to work and the weekend on 25 dollars worth of gas and still had a quarter tank left. The gas I am saving will pay for the new car. At least I got some of my tax money back.
8-04-2009 @ 5:57PM
April said...
Has the Cash for Clunkers benefitted the new car industry? Absolutely! Has it benefitted those people who still have jobs, credit standing and money to purchase a new car? Absolutely! Has it benefitted the environment due to less gas emission? According to scientists, yes, a "teensy" bit in the all-over picture. Has it benefitted the average American who is barely making ends meet in this recession, either with a job they're worried about, or no job, driving an older car out of necessity not choice? Not hardly!!!!! But what's new? People who every day struggle just to maintain their status as "middle-class" continue to fall thru the cracks.
8-05-2009 @ 2:51PM
jlc128 said...
Why not help the truck manufactures also, lets be fair.