Musing about Cash for Clunkers and our economy
I just heard a radio commercial made by Milwaukee icon Ernie Von Schledorn, where he says something like, The government is going to give you money for your clunker.
Ah, how easily we are entranced by the prospect of getting "free" money from the government as if it has no cost. I wonder how much we would embrace the program if all commercials advertising Cash for Clunkers would have to say, You taxpayers are giving these buyers $3,500 to $4,500 to turn in their old heap and buy a new car.
The government allotted $1 billion for the original Cash for Clunkers. In very rounded numbers, if we divide that number by number of taxpaying returns -- about 100 million -- we get roughly $10 per average taxpayer.
According to CBS News, the House just passed adding an additional $2 billion into the program! The Senate is to take up the measure next week.
That additional $2 billion would generate another $20 tax liability for those of us who actually pay taxes.
If the additional funding passes, and why wouldn't it, this President and Congress spend money like water, the total Cash for Clunkers tax liability would be $3 billion dollars. That is $3,000,000,000 or $30 per taxpayer return. (The $30 is an averaged number. None of these figures include the interest.)
One way to know if a program is really a good idea is to ask yourself, would I give a total stranger $30 in order to help them buy a new car? (I am a taxpaying household.) Would you even give them $10? I wouldn't.
I suspect you wouldn't either.
Another thought: Considering that all these clunker chuckers now have to buy a new car, is our economy sluggish because people don't have the money to spend or because they don't have enough faith in our economy to part with their money? Obviously, getting up to $4,500 in "free" money has nudged these reluctant consumers into the buy column.
We don't know the long term consequences of this program. I have to think it will take a fair amount of affordable cars off the market, the cars that lower income families and college students depend on for their transportation needs. On the positive side, the automotive industry is at last making some sales.
Although I am not in favor of deficit spending to stimulate the economy, is anyone wondering what a plain old stimulus check paid directly to taxpaying Americans would have done to stimulate the economy instead of the $787 billion dollar pork laden one we were saddled with?
More reading: Aug. 4, Obama administration withholds data on clunkers: 6 out of 10 vehicles purchased are Honda, Toyota and Hyundais.
Heritage Foundation Cash for Clunkers, A Case Study in Why Obamanomics is Failing
Dealers Race to Get Their Clunkers Crushed
New Cash Steered to Clunkers