August 25, 2009

Cash For Clunkers: What Happens Next

I'd like for us to upgrade my wife's car, which we just finished paying off. But we're not going to do that -- we're going to hold on to the car that we don't need to make any payments on, and probably not replace it until we're done paying off my car, so we only have one car payment at a time. Until then, we'll make do with a not-so-spectacular vehicle and continue to live within our means. That is more important, and worth more money in tough times, than gaining an additional five to ten miles to the gallon. That's a decision that makes sense for individual consumers.

But apparently, that sort of decision doesn't make sense to the economic nincompoops in the Obama Administration, who think that we're so collectively rich as a nation we can just destroy perfectly good cars to buy new ones on credit.We're not doing it to decrease overall oil consumption or protect the environment. As a society, we're not about to run out of oil. We've already demonstrated that even dramatic increases in passenger car mileage is of only minimal benefit to the environment as compared to unspectacular, incremental increases in very-low mileage vehicles.

We're apparently not doing it to benefit American auto manufacturers, because it turns out that 59% of the vehicles purchased in the cash-for-clunkers program are foreign, and eight out of the top ten purchased cars were Japanese or Korean. So what we've done is to temporarily subsidize sales of foreign cars.

That's, um, not what I recall as being the stated policy goal of this program.

Well, what happens next? Let's say you traded in your old "gas-guzzling" car for a newer Japanese one. Got somewhere between $3,000 and $4,500 for it. What does the dealer do with that old thing? Does he turn around and re-sell it, injecting badly-needed cash flow into the automotive market, reducing the overall market price of cars so that more people can buy cars later, or even take it apart to part the thing out or sell it to a parts dealer?

No. Here's what seems to be a perfectly nice 2001 Corvette. The guys pour in some kind of clear gunk liquid into the engine, which eventually gels up and seizes, permanently disabling the motor (engine smokes at 3:00 and seizes at about 4:30):

As if that weren't sin enough, next they destroy the vehicle completely. Here's a perfectly operable Dodge Dakota 4X4 turned into a dense steel oblong in the name of temporarily subsidizing the sale of Hondas, Kias, Toyotas, and Hyundais:

We were sold this program as a way of revitalizing the American auto industry, meaning primarily the Big Three of GM, Ford, and Chrysler, and improving environmental conditions. The result, however, is a billion and a half dollars of national debt we didn't have before and a bunch of junked, formerly-operable cars.

I'm waiting for the part where someone explains to me why I'm better off for our government having done this. I'm not holding my breath. In the meantime, I'm adding a new tag to the blog: "Lighting Our Money On Fire."

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