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August 31, 2009

Irony of Cash for Clunkers Popularity

I have always viewed cynicism as a form of deep moral cowardice. Particularly in public policy where choices matter and the opportunity to make a difference is often determined by stubborn and righteous persistence. The cash for clunkers program has seriously challenged my high mindedness. It is time for a bit of soul searching.

In order to promote full disclosure, I admit to supporting a much more scaled down fiscal stimulus plan. In some limited ways the fiscal stimulus plan worked. In others it failed. I will write more on that later. But it seems that after the stimulus was passed, the banks safely bailed-out, and the domestic auto industry supplied with a huge gift, Congress descended into true madness.

To a cynic, the cash for clunkers program was cynical excellence writ large. Given the weariness of the American taxpayer to recent spending, the $4 billion price tag looked like chump change. This protected those who supported it from persistent criticism that they are now receiving on healthcare, which according to the Congressional Budget Office is at least 350 times more expensive. Who would waste ink on a scant $4 billion, especially when it was as artfully named as any used car holiday sale?

It was popular with voters who owned clunkers. How could it not be? The largesse of government spending $4,500 per trade-in has a guaranteed voting block. The great chronicler of early Americans, Alexis de Tocqueville, worried that the undoing of the American experiment would be the realization by vapid masses that Congress could vote them money. Here was the French nobleman’s predictions come true in a plan to eliminate the 1989 Chrysler LeBaron. How deliciously ironic is our folly.

Congress really won big here, because the beneficiaries of this $4 billion bounty were not limited to consumers. Environmentalists could rejoice that perhaps a million clunkers could be resigned to the dump. At the rate of this program we could meet the Kyoto Protocol standards for a mere $3.7 trillion more in subsidies to car owners. That makes cash for clunkers a serious competitor to cap and trade.

Folks who sell cars benefited and it was a rare respite. But given the reluctance of the Department of Transportation to release data, I’m going to guess it was Toyota and Honda who danced to the bank. The program also gave many Americans businesses the reminder that dealing with a Federal bureaucracy makes a root canal seem an uplifting, almost joyful experience.

One group was left out. Among the parade of Camaros and the ghastly last seven 1983 GM model year cars still running, were some classics. A GM roadster, an elegant Volvo and perhaps even that memory packed 1975 Dodge Dart I sold for $300 and a tank of gas in 1987 were unceremoniously destroyed. Now, more than ever, we need a classic car enthusiast bail-out package. Though he is a Republican, given his political and cultural significance, Clint Eastwood should be classic car Czar.

Link to this commentary: https://commentaries.cberdata.org/48/irony-of-cash-for-clunkers-popularity

Tags: auto industry


About the Author

Michael Hicks cberdirector@bsu.edu

Michael J. Hicks, PhD, is the director of the Center for Business and Economic Research and the George and Frances Ball distinguished professor of economics in the Miller College of Business at Ball State University. Note: The views expressed here are solely those of the author, and do not represent those of funders, associations, any entity of Ball State University, or its governing body.

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