Tuesday, August 4, 2009

Clunker In The Trunk

Lots of people tried to rush out and get some free money this weekend: up to $4500 worth to be precise.

Congress passed an auto-subsidy bill with (only!) $1 billion behind it. The Cash For Clunkers bill was supposed to get older polluting cars off the road and stimulate flat-lined auto sales during the recession: green all the way around, so to speak.

It was too much and too little all at the same time. It was too little because the program will only replace around .1 percent of cars on the road - a statistical blip. The program ran out of money almost immediately as the gold rush was announced. Now Congress is under big pressure to throw another $2 billion at it -- and they'll get it. Nobody likes to be the killjoy that stopped the gravy train. Whee! Free Money!

Only it's not free, it came out of our pockets to begin with: specifically, whoever did NOT go out and buy a car helped subsidize those who did. They're called taxes. It's too much, because a) they already need more money, and b) there is a better way to spend (or not spend!) a billion dollars, or two, or three during a global recession.

Although the bill was "instantly popular", there are a few naysayers. One of the unrealized drawbacks of the Clunker program is that the old car must be destroyed, not just broken up for parts. Uh oh. The availability of used cars and replacement parts just went down which hurts small businesses and repair shops as well as lower income families.

Overall the program won't be a big impact on the environment, and with a limited war chest it won't be a big impact on the flagging American auto industry either. In the final analysis, I think it pretty irresponsible thing to do when we've got a trillion dollar deficit.

Bread and circuses.

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