Morning Bell: Cash for Clunkers, A Case Study in Why Obamanomics Will Fail

infographic-cash-for-clunkers1From the Heritage Foundation

If you watch television you’ve seen the ads: “So bring in that old jalopy and get up to $4,500 towards the purchase of a new or select used vehicle. That’s right, get up to $4,500 for that old piece of junk, plus you keep the rebates. You have to hurry! Since funds are limited for this program it’s first come, first served!” Well, we’re about to find out just how limited those funds were. The Obama administration’s cash-for-clunkers program has been such a “success” that in just the first week of full implementation, the $1 billion originally allocated for the program is about to be exhausted already. Does this mean the program is over? We don’t know. Nobody does. And that is just the beginning of why this program is a perfect illustration of why Obamanomics will fail.

Does Nothing for Environment: Sens. Dianne Feinstein (D-CA) and Susan Collins (R-ME) are open to allocating more money for the program, but only if the rules are changed so that the program might actually do something for environment; because right now it is not. Edmunds.com auto analyst Jessica Caldwell explains why: “What you buy has to have an increase in fuel economy from what you traded in. But in some cases, that increase can be minimal. Owners of large pickup trucks like a Ford F150 only have to buy a replacement that increases efficiency by one mile per gallon. And they still get a $3,500 rebate. The environmental impact is negligible and the impact on national fuel demand and consumption is very small. The only real benefit in a like-for-like swap can be improved emissions standards on newer vehicles. Rather than discourage those people, they included them in this program.” Caldwell didn’t even mention the pollution costs of actually building a new car and the disposal of the old car, rather than just the pollution caused by driving the vehicle.

Hurts Working Americans: The federal government’s push to help auto makers has unintended consequences which will hut many lower-income Americans. Economist, Freakonomics author and New York Times blogger Steven Levitt writes: “People who drive clunkers are generally not in the market for new cars. Presumably their replacement car will be a used car. The increased demand for used cars will lead to higher prices for used cars.” Driving up the cost of older cars may be an intended consequence for policymakers to encourage people to buy new, but it’s a bad deal for consumers.

Read the rest at the Heritage Foundation.

5 Responses to Morning Bell: Cash for Clunkers, A Case Study in Why Obamanomics Will Fail

  1. Paul Wenum August 10, 2009 at 11:33 pm #

    It is a success if you want to give yourself a loan for $4,500.00 on a “new car.” ? It’s coming out of your pocket. What is sad is that I have a very close friend that makes $24,000 at most annually working three jobs. She has a 1997 ford Ranger truck the exceeds the 18 miles per gallon by one mile per gallon. She “does not qualify.” Her car has 300 thousand miles on it and now where will she find a “used car”? The good one’s are gone due to the ignorant plan of destroying the engine and crushing the remains. Nice used cars will now be gone. Yes, it helped car dealers SHORT TERM. In fact I recently read that 60% of puchases went to cars not made in America. Wonder why? What goes around comes around. I live by that and I own GM products as well as two Toyotas (98 and 2005 Kids car and wifes car) I drive my Trailblazer as well as my old 24 year old corvette that get’s 30 mpg on the freeway!!! Love em both!! Let’s get this country back to where is should be, productive, innoative and daring in going forward instead of fearing that the sky is falling. Enogh said.

  2. Neil F. AGWD August 11, 2009 at 3:15 pm #

    Paul:
    That won’t happen while Obama is President. He wants the U.S to be a third world country.

  3. Paul Wenum August 11, 2009 at 9:42 pm #

    Look at the 1950 Chevy’s in Cuba. They are still running! GM at it’s best when they are allowed to do what they do best, make cars. Why don’t imports such as BMW etc. have cafe standards? Oh that’s right, their Co2 is not enough to make a difference. I might be brain-dead but I’m not that stupid. Oh well, there is always 2010 and 2012 called “Voting.” Later.

  4. Rob N. Hood September 19, 2009 at 8:15 pm #

    Poor GM. The gubmint ruined it, and now owns it! I smell a conspiricy!! Oh, wait, that’s just supper burning. So who ran GM into the ground? Democrats, right? How was that though, when there were more Repub administrations since the 50′s than Demo?? Hmmm… Gee, maybe, just maybe, they became increasingly arrogant, lazy, and dumb and made crap nobody wanted to buy. Naa! Can’t be that- we gotta blame the evil Gubmint! Why? Just cuz, that’s why! Paul, maybe you should move to Cuba since you seem to hate America. I hear they have some really cool cars…

  5. paul wenum September 20, 2009 at 1:11 am #

    Call Al Gore. I assume he is waiting. No more comments actor. No more “Later.”

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