The ‘government’ did okay with ‘Cash for Clunkers’

I’d give the Obama administration a solid “B” for the cash for clunkers program. It was a government stimulus program that was easy for the public to understand; it probably saved about 39,000 jobs, according to one analyst; and it had an environmental benefit besides. It got older, gas-guzzling, pollution-spewing cars and trucks off the roads and replaced them with more fuel-efficient models.

The program wasn’t perfect. It has taken dealers a very long time to get paid,  and that works a hardship on smaller, cash-strapped businesses. The Transportation Department was caught up short by demand for the program and didn’t have enough workers in place to process applications.

But automobile dealers, who tend to be cowboys of capitalism, ought to be pleased.

46 comments Add your comment

Pat Phelps

August 27th, 2009
12:32 pm

Just another liberal handout that taxpayers have to pay for. Why do you believe the government should take care of you or that you are owed something by this country. The Federal government was formed after the revolutionary war for several reasons, but the primary reason being to protect us from foreign powers. Now who protects us from the federal government. God help us all.

jt

August 27th, 2009
12:41 pm

The Transportation Department?

OMG.

Cosby Smith

August 27th, 2009
12:48 pm

Cash for clunkers, now Cash for old appliances…when did the Government get into the junk business. By the way, is any ot this constitutional. I doubt it and remember, someone has to pay for this as the government does nothing to earn money! another waste of the hardworking citizens money that is confiscated by Big Brother and Ms tucker cannot understand it!

jconservative

August 27th, 2009
12:51 pm

Pat Phelps – Who protects us from the federal government? It is supposed to be you. If you do not like the direction of government all you need to do is vote against the incumbents at the next election.

Unfortunately, the 535 members of congress are really career government employees because you keep electing them to office. So they keep on keeping on, and you now have a growing deficit of $11 trillion with no end in sight. If you had sent a new Representative every 2 years and a new Senator every six years maybe, just maybe, someone would have gotten the message. You gave Reagan 2 terms, Clinton 2 terms & Bush 43 2 terms. None of the 3 did anything to deserve a 2nd term.

And I do not mean you personally but the American electorate as a whole.
In short, what we have is what we asked for. The enemy is not Democrats, the enemy is not Republicans, the enemy is incumbents!

Tom

August 27th, 2009
12:53 pm

Of course, rampant capitalism with few controls and tiny government (only for defense) would not be as ideal as people like to pretend. I think if you could actually live in a world where that kind of government existed for a country as large and diverse as ours, you’d be quickly nostalgic about what we have now, as messy and imperfect as it is.

Pat Phelps

August 27th, 2009
12:56 pm

Tom – last time I checked rampant capitalism is what built this country, not government controls and liberalism..

jt

August 27th, 2009
12:58 pm

“I’d give the Obama administration a solid “B” for the cash for clunkers program.”

The respective “Transportation Departments” of Japanese and Korean coorporations have unanimously given an “A+” to the “clash for clunkers” program.

jconservative

August 27th, 2009
1:18 pm

Cynthia, the clunkers program was not a Obama administration plan. Senators & Representatives from Michigan & Kansas (auto producing states with closed factories) cooked up the program. Original funding was $4 billion. When the administration heard of the bill, they sent Rahm Emmanuel over to kill the bill. When he got arrived he found a bill with a bunch of co-sponsors. He could not kill the bill but did get it cut back to $1 billion. And it passed that way & Obama signed.

Then it took off. The administration had really under estimated the demand. So they added $2 billion in a second bill. But the administration deserves no credit for the idea. It was a congressional deal all the way.

Real

August 27th, 2009
1:18 pm

“…The Federal government should not be in the business of initiating and administering short-term incentive programs designed to shape consumer purchase behavior. It has no experience in such initiatives and proved itself incapable of forecasting demand associated with different incentive levels.

And the auto industry hardly deserved special treatment, when home appliance and furniture sales, for example, are equally in the doldrums…”.

Peadawg

August 27th, 2009
1:35 pm

Ofcourse Cynthia like the program…her boy came up w/ it.

Tank

August 27th, 2009
1:47 pm

ZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZ…Huh, did someone say something important? Chirp…Chirp…Chirp…Chirp…

Guess not..

stands for decibels

August 27th, 2009
1:49 pm

Peadawg @ 1.35, meet jconservative @ 1.18.

I don’t really know much about the embryonics of this thing, but what’s funny is, when I first heard about it, it sounded like the sort of thing you’d expect from the GOP, and I was kind of surprised when so many Republicans were yelling about how awful it was.

It was a fairly modest little program, which worked pretty well at what it was intended to do. Does everything have to be a knock-down drag-out fight, folks?

one last thing…

“But the administration deserves no credit for the idea. ”

Well, if a President signs a bill into law, doesn’t he get some credit?

Jackie

August 27th, 2009
2:00 pm

The Japanese and Korean auto companies are in the USA with the blessings of the Southern Senators – AL, TN, MS, GA, SC – because many wrongly believed the Unions were destroying the country.

We now have right-to-work laws that effectively emasculate the unions; companies that do not have benefits, namely health care and retirements benefits (say 401k); the starting salaries are in the low to mid-10’s per hour; work conditions have deteriorated.

Many are complaining about the federal government being in control, yet, do not realize the companies are in control and the average voter gave up their rights to the corporation.

Why are these same people complaining about the companies moving “our jobs” overseas when the companies and their paid political representatives – Congress – have legislated away their middle-class status?

Wonder why these same folks are not complaining about their federal representatives as they should know unions have no power in the states where automobile companies are moving.

Be careful what you vote for, you just may get it!

Saiwyn

August 27th, 2009
2:15 pm

@ Jackie

Companies are moving jobs out of the U.S. because unions aren’t powerful enough and labor is CHEAPER without them?!?!

The reason the auto companies are moving into states with no unions is due to the fact that union wages are completely unaffordable and a strong union completely destroys their profit margin. If a company can’t make money they can’t stay in business.

I bet that’s okay as far as you are concerned though right?

You are allowed to make money but a corporation is greedy for wanting to do the same?

Get real.

Dave R.

August 27th, 2009
2:30 pm

Yeah, Cynthia, the “Government” did GREAT with this program.

They’re going to TAX the $4500 they gave to everybody who took advantage of this boondoggle. As will many states.

BTW, Toyota did REALLY great as well. American automakers – not so good. Especially the after-market parts companies who will be taking a hit for all the U.S. cars and trucks no longer being serviced because they were trashed.

Jake

August 27th, 2009
2:47 pm

Another handout for different constituents. How many of those temporary 39,000 jobs disappear next month when car sales tank again? All this program did was borrow future car sales, accelerating trade-ins that would have ahppened over the next few years into a few short weeks. Any bets on what car sales look like for September?

RealityKing

August 27th, 2009
2:52 pm

It was great! I traded in my old SUV for a new SUV. Thanks.., SUCKERS!!

Jackie

August 27th, 2009
3:18 pm

@Saiwyn

I would disagree with you completely.

The domestic auto companies profits were not as strong as the foreign competitors because domestic companies had health care costs included in their overhead.

Foreign companies DO NOT have health care costs built into their overhead. A perfect example is Canada. They have national single-payer insurance and auto companies do not have to include the average $3,700 cost per automobile into their cost.

Secondly, each US supplier has the same dilemma, therefore, the cost of goods and services associated with the supply chain are more expensive because of those costs.

Third, the American worker is the most productive IN THE WORLD. We take less vacation, work longer hours, better educated and produce a more cost-effective product than anyone else. Have you ever wonder why all the car companies move to this country?

Fourth, the USA is roughly 25% of the world’s Gross Domestic Product. For anyone to make money and be competitive, THEY HAVE TO MARKET IN THE USA!

Fifth, the myth about union workers making $70 per hour is just that, A MYTH!

Given these facts, as a head of a business, would you not want to move your operations to this country to produce a quality product that has a shorter supply chain and is in the middle of the world’s largest consumer market and who income retention rate is practically zero? This means we virtually spend every dollar we make.

Dave R.

August 27th, 2009
3:53 pm

Jackie, while the average worker certainly does not bring home $70 per hour, with benefits load added to their salary, they cost companies $70 per hour. Non-union wages and benefits aren’t nearly as costly, and people are just as productive – even more so – than union workers.

stands for decibels

August 27th, 2009
4:07 pm

The oft-touted 70/hour figure includes legacy pension/retirement health insurance costs. Funny how Dave R. neglects to mention that.

Bob Henneman

August 27th, 2009
4:34 pm

The problems with the program were many, and it is far too soon to give it a final grade. Some surveys show that the vast majority of purchasers would have bought a new car soon anyways, so those extra sales this months may be offset by reduced sales in comong months. If so, then no jobs were really saved, as post-program layoffs will be even deeper than before. Also, foreign car brands outsold US brands under this program at a significantly higher rate than what is normal for the market place- so US companies were not helped as much by my tax dollars as US companies were. Industry experts say the energy needed to build the new cars more than offsets any energy savings on fuel over the life of the new car, so the environmental impact may actually be negative. And lastly, there are 450,000 fewer used cars priced below $4500 available to lower income buyers, so the impact on used car prices has yet to be seen.
So it is far, far too early to know the impact of this program. It may very well end up being a “B”, or even an “A”, but uit could just as easily be an “F” long term.

Dave R.

August 27th, 2009
5:13 pm

Stands for decibels (which, by the way, is just about the most bone-headed moniker on the web), what do you think “benefits load” means, moron?

Jake

August 27th, 2009
5:29 pm

Bob – That energy impact data is garbage, generally a huge problem with most of the green/energy ideas. As you correctly pointed out a few sentences earlier, those cars were going to be built and sold anyway! It seems to me that we now have 450,000 cars using less gas sooner than they would have otherwise so there must be some savings.

Jackie

August 27th, 2009
6:10 pm

@Dave R

The $70 per hour figure is what many tout to be total cost per hour for hourly employees. If you think about it, that figure could not be true. If one makes $35 per hour salary, overhead for that worker is usually in the 18% to 20% range. This would add an additional $7 per hour for pension, health care and other items included in the overhead calculation.

What is missing from this calculation is the UNION renegotiated their contracts wherein they would take on the health care costs and lower base hourly wages. The UNION wanted the auto companies to honor their contracts to retirees.

Secondly, most companies have a backup(government) that says if they default on their pension, their is an insurance policy like the FDIC uses to backup banks to backup pensions.

The big kicker in this discussion is bankruptcy. If a company declares bankruptcy, they can negative ALL past contractual obligations. Remember K-MART?

So, given the fact the $70 per hour is not a valid number and the auto companies that are unionized DO NOT have health care responsibility, their cash flow has increased tremendously because their overhead has been reduced substantially.

Can we agree on these facts?

Jackie

August 27th, 2009
6:14 pm

@Dave R

I forgot to mention my post stated THE AMERICAN WORKER is the most productive in the world. That number includes union and non-union workers.

Dave R.

August 27th, 2009
6:15 pm

No, we can’t Jackie, as overhead is a MINIMUM of 33%, and is far higher for union shops.

I Report/ Vast White Wing Conspirator (-: You Whine )-:

August 27th, 2009
7:10 pm

Yeah and Obozo didn’t even have to pay the dealers.

Call it rationing, if you will.

Mario

August 27th, 2009
7:54 pm

The “Cash for Clunkeres” program, enacted a little late, was a good program. Let’s not forget that the whole world economies are going through a very difficult period. Anything that governments can do to help businesses and people cope with these hard times is beneficial to everyone.The same program started in Europe way before it started here! Very successful because makes economic sense! It saves jobs and keps the economy moving! It might be temporary, like some people think it is, but is better to do someting than nothing!

Class of '98

August 27th, 2009
10:34 pm

Wow, “one analyst” says it saved 39k jobs.

If that’s not convincing, I don’t know what is.

gunny y.

August 27th, 2009
10:39 pm

i agree with everything that you said, cyn. war eagle! toomer’s corner, girl!

Jackie

August 27th, 2009
10:50 pm

@Dave R

Could you point me to the documentation that you cite that states overhead in a union shop is 33% of salary?

Now, given that YOU believe overhead is 33% of hourly wage – $35 x .33 = $11.66 – equaling an hourly wage of $46.66 per hour. Good money if one can get that.

I wonder if you really believe what you have posted?
Please forward the link where you found overhead for a union shop is 33%.

Either you are poorly informed or you believe that your words should be taken seriously?

Carter is a Fool

August 27th, 2009
11:06 pm

I thought we were trading you in for someone who could write and did not have visions of racist running everywhere. I guess not. It is is a shame.

As to Cash for Clunkers, it had the unintended effect of moving future car sales into the short current time period. Now there will be few who will come to buy in next months because they were pushed into the showroom by the Clunker incentive.

It was a definite successful program by the government definition of success. The government declares a program successful if it is popular and goes massively over budget. Cash for Clunkers joins the Department of Defense, Medicare, Medicaid, Foodstamps (well heck all Government Programs) as being successful.

Dave R.

August 27th, 2009
11:25 pm

Jackie, as soon as you can show me that a union worker makes only $35 an hour, I’ll show you the study on benefit load for union shops.

However, you can simply Google it and find it yourself.

Jackie

August 27th, 2009
11:40 pm

@Dave R

How did I KNOW that you would come up with that lame excuse?
You and I know that you can not prove a negative, therefore you revert to the usual CONFLATE, EXTRAPOLATE, OBFUSCATE!!!!

Powerful arguments that you proffer!

Greg in Virginia Highlands

August 28th, 2009
1:47 am

Come November, people will looking for another handout. That’s when they’ll realize they can’t afford the new car note and higher insurance and the repo man will be knocking.

Jimmy62

August 28th, 2009
7:33 am

Those jobs it saved will just be lost when all the people that would have been buying cars over the next 6 months don’t… Because they all bought now in a big splurge. Not to mention we destroyed billions of dollars worth of perfectly good vehicles that will now not be on the used car market for those of us who can’t afford new cars to buy. Thus if you need a cheap vehcile to get from point A to point B, it’s going to cost a lot more. And those cars we destroyed had already given most of their lifetime supply of carbon into the air, whereas these new cars we replaced them with have many years of carbon spewing to go.

It was a silly program will lots of consequences which don’t match what you and the government are bragging about.

theROOSTER

August 28th, 2009
7:40 am

I would give the program a C-. They far underestimated the running costs of the program and are being dreadfully slow in reimbursing dealers. However, if you subscribe to the Keynesian model of economics, than this would qualify as a success. It did stimulate the car industry, as well as local economies in ways that the stimulus package has not been able to. It will be interesting to see what long run affects it will have on the new and used car markets. Or, what unintended consequences will the program bring? Oh, and do these people realize that they will be taxed on their rebate? That it will qualify as additional income?

Karl Childers

August 28th, 2009
8:02 am

When the the public-servants figured out that the most fuel-efficient cars were being built in Asia they relaxed the fuel efficiency component thus enabling drivers like Reality King to buy new vehicles that were barely more fuel-efficient than the SUV he was already driving. This adjustment made the program a Detroit bailout instead of an effort to replace gas-guzzlers with fuel-saving vehicles.

The average cost of a vehicle purchased under the program was $28,000. Assume an average down payment of $9,000 (federal handout + dealer match). Your “stimulus” plan just saddled a consumer who was already drowning in debt with an additional $20,000 or so in new debt. This “stimulus’” didn’t create a job, it simply added a new layer of indebtedness, so that Detroit could receive the infusion of cash needed to operate for another (fill in the blank) months.

These clunkers are being destroyed, not re-sold. If I go out and break the windows out of all the houses in my neighborhood the replacement window companies will enjoy a nice windfall until I run out of windows to break. Then what?

True economic stimulus comes from programs that actually create new jobs. A massive infrastructure project (think TVA) creates jobs, gets dollars moving through the economy, and produces long-term benefits to the country. Smashing up a bunch of old cars so people borrow money to replace them is really not much of a “stimulus” at all and so as a stimulus program, “cash for clunkers” gets an F.

theROOSTER

August 28th, 2009
9:14 am

@Karl,
I disagree. How do we know that the consumer was drowning in debt? They were obviously credit-worthy enough to secure a $28K loan at a time when credit is still difficult to get. And how was it a Detroit bailout when the biggest winners were Japanese and Korean models? The program helped local economies and probably (at least temporarily) saved jobs. I am not particularly big on government solutions, but the program did what it was designed to do and was therefore, a success. However, it was poorly managed by the government. As much as I disagree with 95% of the president’s domestic agenda, I don’t hate this program.

Brad

August 28th, 2009
10:07 am

@Jackie and @Dave R.

Dave is being kind, but you both are missing one of the biggest component of labor costs – the legacy benefit programs that the domestic car companies must continue to pay but from which they receive no production (health care, pensions, and other benefits promised to retirees). Unfortuantely, the “total hourly cost” of an employee doesn’t just consist of the expenses attached to that single employee.

Just like with social security, we’ve got a smaller and smaller pool of current workers who are being required to subsidize the benefits of a larger and larger legacy workforce. In social security, it is going to eventually mean reduced benefits to retirees or huge increases in how much the current workers (or employers) pay into the system. In the auto industry, it results in a huge increase in the “per employee” costs that the auto company must bear.

As you can imagine, the legacy costs of Ford and GM, who have been around for about 100 years, are much much stiffer than the legacy costs of Toyota and Honda, who have been subject to American regulations for much less time.

Bob Henneman

August 28th, 2009
11:07 am

Jake-

You missread my comment. I did not use any absolutes- there is a chance those cars would have been built anyways, but my whole point was that it is too early to tell. If those cars would have been built anyways, then they do have a positive environmental impact, but a negative economic impact, because the just stole sales from other months. If it turns out those cars would not have been built anyways, then the program had a positive economic impact by creating new sales, but a negative environmental impact from the extra manufacturing. Only time will tell.
Time will also show if and what impacts there are in other areas, like the number of used car sales down the road, the effect on US parts suppliers and makers who will no longer sell parts to the owners of the cars turned in (the top ten cars destroyed were all American, but 60% of the cars sold were foreign), the amount of tax revanue generated from state taxes and sale tax when the money is spent…all those things could be positive or negative, but it is too son to know.

Suliman

August 28th, 2009
1:01 pm

Do I now understand that the $4500.00 that I received on my old vehicle will be treated as INCOME ,and will be taxed acordingly ?

wl

August 28th, 2009
1:58 pm

Don’t know where she pull the 31K jobs “saved” magic number from. Let’s just give her that and here’s my basic math: $3Billion/31K jobs = $76,923.07 per job “saved”. Yeah, the govt did OK, but not the taxpayers! Now could the govt saves my job too?

Karl Childers

August 28th, 2009
4:48 pm

Rooster – If the public-servants had actually preserved the intent of the program, which was to encourage drivers to trade in fuel-wasters for fuel-efficient models, Asia would have won the day in a landslide. When our public-servants realized what was about to happen they altered the program. Suddenly, a one-mile-per-gallon improvement on some models was justification enough to earn the $4,500 credit. Just like that Detroit was back in the game. The question is was the program designed to move inventory or to take gas-guzzlers off the road and replace them with hybrids?

When viewed through a macroeconomic lens the U.S. consumer is very debt-laden. In fact, maybe you’ve heard that some consumers actually owe more on their homes than their worth.

If the program “temporarily” saved jobs, as you claim, how does this benefit anyone? Shouldn’t those now-subsidized jobs be allowed to vanish if a more efficient and profitable competitor can make a better product? After the government money stops flowing isn’t that what will happen anyway? Why do our public-servants subsidize a particular industry over another? Could it be because Detroit unions were owed a favor after helping get certain public-servants elected?

R.P.

August 29th, 2009
4:05 pm

The government is a business. Every action they make should be understood as such. The people are the stockholders who stand to bennefit and suffer by the moves in which their gov’t. makes. “Cash for Clunkers”, can be best described as a solid “B” in my opinion aswell. Simply based upon stock holder morale,(the people). As an average stock holder faith in President Obama is stronger than President’s of the recent past. Much stronger. As a result we are dodging a depression and beginning our slow ascent back to the top of the national market. As opposed to falling into a U.S. not unlike the 1920’s.

Scott

August 30th, 2009
5:09 pm

You must be grading on the curve. Fascism in Germany wasn’t perfect, either. It took people a long time to clean up all the dead bodies, but Hitler did succeed in making the trains run on time. Give Hitler a solid B for his efforts.

Oh, and before anyone goes screaming about comparisons, let me qualify myself here: I’m NOT saying that cash for clunkers = concentration camps. Like everyone else who employs the technique of hyperbole, I’m using an extreme example in order to make a point.