Cash for Clunkers, Good or Bad?

Market value. What is it an how does it work? It works by the laws of supply and demand as far as I know. You make too much or make it poorly and the demand for such an item is not high. Because it’s demand is low, the price has to drop to get rid of the inventory. Likewise, if you have something that is very high quality and/or rare, then the demand for that item is high and therefore the price goes up.

As a side note, this is even true of our labor. If we graduate high school and nothing more, the demand for our labor is minimal because nearly everyone has a diploma. Likewise, if we go to school for 15 years to get a Ph.D in neuro-science then not many people are going to have those skills and therefore we get paid more. Important subject on labor cost, but not the focus of this article.

What I want to talk about is the government program entitled Car Allowance Rebate System (CARS) and also commonly known as the Cash for Clunkers program. As I understand it, if your car is less than 25 years old and gets a low miles per gallon, you can trade it in for $3500 – $4500. Great right? The auto dealers get to sell cars and get cars off their lots. You get a new fuel efficient car that will save the world’s ecosystem. The auto manufacturers will be saved because you are letting them continue to make cars and thus keep all their people employed. And most importantly you will be able to pick up babes more effiently in your new car instead of your clunker.

Perfect! Or is it?

Where is this money coming from? What does the forced trade-in of a worthless pile of junk for $3500 – $4500 do to the market demand price? What about your continued debt? What about all these offers from dealerships/manufacturers where they say if you lose your job you can suspend payments or just give the car back. Then what?

On the surface it addmitedly seems like a great plan. But once I look into it, it doesn’t seem like such a swell idea. More than anything, I don’t care for the continued debt on the individual. Debt is slavery, if you haven’t already noticed this. I also don’t like the idea that tax dollars are being used to buy out garbage and screw up the fair market value of goods in the free-market system. And let’s face it and make this crystal clear, CARS isn’t about getting you a nice new car, it is about a covert bailout for the auto industry.

Our government knows that giving direct bailout money to corporations isn’t flying. Americans don’t want to hear that their tax dollars is being doled out to corporations to do as they please. So, to continue giving money to the corporations, the government has come up with a new way to funnel money to them. Of course, the Socialist trick is to make you think that the government is helping you out, not the corporations.

I want to make it clear that I have nothing against giant corporations – what I do hate is when government meddles, especially heavily, in their affairs and their livelihood. If companies are as mismanaged as the auto industry is… then let them fail. I am interested to see how this debacle ends when people get their new cars and then lose their jobs and then try to sell them off and they can’t because of stipulations in the bill and/or something else likewise stupid.

4 Responses to “Cash for Clunkers, Good or Bad?”

  1. 1 DJ
    4 August 2009 at 15:30

    Many of those that will qualify for the “feel-good, good deal” will end up further in debt because they got rid of an asset (probably paid off) for a debt (I believe you correctly called that slavery). Then the asset MUST be destroyed…

    And lets not forget the other side of the “clunkers” issue. Older cars are, for the most part cheaper. Teenagers buy so called “clunkers” for their first vehicle. Often, those that receive low[er] earnings buy clunkers, many second cars are in the “clunker” category. With the shameful “cash for Clunkers” program, which, as you alluded to, “feels good” in actuality hurts those who most need the low end cars (remember they had to be destroyed). What happens to the 17 year old high school senior who has a job and girlfriend? No low cost car for him. What about the 16 year old young lady who babysits across town? No low cost car for her. What about the newly divorced dad who lost the car in the divorce? No low cost car for him to get back and forth to work so he can make his child support payments.

    Then a tertiary victim- the auto salvagers! Without clunkers to get parts from, how many will need to maintian/hire workers?

    This was a horrible idea to begin with, and we may get even more money thrown at it.

  2. 4 August 2009 at 19:46

    DJ: +1! There IS a market for the old clunkers. This is the free-market in order. Even when a car doesn’t run anymore it indeed goes to the auto-salvagers and or is bought to make even newer cars with the old materials.

    Just like with nature, you start messing with part of the cycle and you end up screwing up the entire circular cycle.

    Of course, most liberal ideas are all about knee-jerk decisions to make you feel good. CARS taps into the idea that we are dependent on oil. CARS taps into the idea that we need more alternative energy. CARS taps into the idea that the government has been bailing out corporations and not giving anything to individuals. CARS taps into the idea of change. It taps into a lot of things.

    What it also taps into is more bailouts, new car registration fees, new car taxes, more clunkers going to the junkyard instead of to the people that need them, more government intervention in the auto industry, and of course more tax dollars to fund such programs.

  3. 3 DJ
    5 August 2009 at 09:28

    Here’s a question. What percentage of the new cars bought under the C4C program, will end up getiing repo’d because the new owner looses his job and can’t make the payment?

  4. 4 Alan Scott
    6 August 2009 at 14:21

    Running Detroit in to the ground was necessary for Democrats to gain power. Remember how they discouraged everyone from driving. How they pushed mass transit. How they blocked oil drilling and refining. Even when they were in the minority they blocked new energy in order to save the polar bears. Well people who don’t drive as much, don’t spend money at restaurants, movies, resorts, etc. They don’t have to buy new or used cars as often, so demand goes down.

    Now having wrecked the car companies and successfully blamed Republicans to gain power, the Democrats are in the strange position of having to manage life support to GM and Chrysler, and to a lesser extent Ford. Cash for clunkers is just life support. It’s a sign of desperation. For Obama Inc. to bring back the American car market they would have to reverse their left wing eco idiot policies and that would alienate their supporters. If they do manage to generate decent sales, then the increased demand for gasoline will push up prices and kill demand again.

    All they really have to do is let the market know that gasoline prices will be stable by increasing supply. People would then have confidence to buy cars, trucks, and even RVs.

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