The cash-for-clunkers deal has been getting a lot of coverage, and I hate it. I hate the program because I think it's bad for America, will lead to financial problems for the vast majority of people who participate in it, and won't help to solve the economic crisis.First, a quick recap of how it works: You trade in your old car that gets low mileage and you get a taxpayer-funded rebate of up to $4,500 off the price of a new car. The rebate is $3,500 if the spread in fuel efficiency between the old car and the new car is smaller. In order to get the rebate, your old car has to be junked. In other words, this is not a deal that someone with a car worth more than $3,500 or $4,500 would take.
So here's why this program is so dumb -- beyond the whole "Why the hell should I have to buy my neighbor a car?" thing: How many people do you know drive a $4,000 beater car and have the means to buy a brand new car? Sure, there's the occasional millionaire next door type, but the vast majority of people who participate in this offer will need car loans to do it. And the vast majority of personal finance experts will tell you that car loans are a sure way to end up broke.
So cash-for-clunkers is really about is providing people with an incentive and motivation to do something that isn't in their best interests. At its very core, cash-for-clunkers is about transferring wealth from low- and moderate-income workers (the people who have old beaters that are targeted by this program) to the auto industry -- and also tossing some money over from the taxpayers too.
And remember: If this were really about increasing fuel efficiency, they'd give you the tax credit for trading down to a more fuel efficient used car too. So don't give me that.
What exactly have we done, then? We've used taxpayer money to help subsidize the purchase of expensive consumer goods by people who can't afford them -- and will end up poorer at best and in default at worst as a result of this case of taxpayer largesse. What will happen in a few years when people who got car loans -- made available by TARP, by the way -- can't afford the payments? Wait a second, I feel like I've seen this movie before. But no one cares because the automobile industry is a major contributor to the campaign funds of both parties.
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Reader Comments (Page 1 of 1)
8-06-2009 @ 5:09PM
mikemaj82 said...
well it's main purpose is not to solve the economic crisis, but to get all the old, dangerous cars off the road that cause pollution. American have always made, and always will make, poor financial decisions, and CARS is no different. Didn't have to read far into this article, but nice try though.
8-06-2009 @ 5:30PM
ddub said...
You're not actually buying your neighbors car. i've checked my neighbors. none of them asked me for money. Only someone of low intellect would be moved by such a foolish argument.
"How many people do you know drive a $4,000 beater car and have the means to buy a brand new car?" At this point about 3. Sorry i'm not a millionaire. my friends can't afford mansions and yachts and the fact that they have a beat up car is due to the fact that they are saving money to buy a better one or to put towards something else like housing, food, emergency savings, some other purchase, etc. I had a $2000 car and had $35K in savings a few years ago.
the fact that it's not in their best interest is irrellavant. Neither is drinking beer but i'd bet you're not for banning beer or taxing it to the point that it pays for all the drunk driving accident damages and all the nation's healthcare costs that result from liver and kidney damages due to alcohol
The reality is what's in the best interest of people is to save their money and not spend it but that actually doesn't help the economy at all. And i'm sure you'd be the first to stand up and take the credit for promoting that the entire public, under the guise of "best interest" save all their money and spend none of it, causeing all the corporate revenues to plummet and resulting in mass layoffs.
"What will happen in a few years when people who got car loans -- made available by TARP, by the way -- can't afford the payments? Wait a second, I feel like I've seen this movie before."
you have. it's called the United States and The Republican party over the last 30 years. Sorry both the U.S. in general and specifically the Bush administration in the last 8 years has lived way beyond their means. They've asked for more tax breaks and loopholes then the country could afford. They've allowed corporations to hand out massive bonuses to nonperformers while robbing the public blind. All the while real americans try to live within their means without loopholes or tax havens or million dollar bonuses. Yeah you've seen it before. You've seen America ignore funding education, police, fire, hospitals in many inner city neighborhoods while sending money and cash to wealthy neighborhoods that don't need it. So now that you think everyone should live only by what they can afford feel free to give back all the money you've been taking as you've bankrupted social security on the backs of our payments while we worked our way through college only to find you've left an economy with no jobs. I'm sure the government would welcome the multibillion dollar check from elitist haves.
8-06-2009 @ 5:37PM
elitewillie said...
This article is dumb. Take some classes on economics and then re-write for re-grading. ddub you are right and I second your statements.
8-06-2009 @ 5:58PM
sonnype said...
I WOULD RATHER SEE MY TAX DOLLARS SPEND ON A PROGRAM LIKE CASH FOR CLUNKERS WHICH IS EASIER TO STOMACH THAN SEEING MY TAX DOLLARS GO TO PAY THE BOUNSES OF THE GREEDY SOB BANKERS THAT ALMOST DESTROYED THE WORLD ECONOMY.
8-11-2009 @ 5:16AM
jimhenry said...
You don't need a voucher, dealers will apply a credit at purchase
Jimhenry
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