Monday, August 3, 2009

What to do about Cash-for-Clunkers program

So apparently the $1 billion program in the stimulus has run out of funds in a few weeks. The program provides up to $4,500 for qualifiying car purchases from trading in cars that are less than 25 years old with low mileage standards to new cars with higher mileage standards.

The House recently approved a new appropriation for $2 billion to be allocated for the program. I do not know if that is new money or just a bigger slice of the stimulus. Also, rumor has it that Senate Republicans and Blue Dogs are looking to kill the new House appropriation of funds.

Overall, I think this is an idea that is working. The fact that it ran out of money in a few weeks shows that it's working. And I think this shows where government can be effective if it's targeted well. The consumer gets $4,500 towards a new car which will save them money in the long run. The government gets old gas-guzzlers off the road and newer more environmentally friendly ones on, and to top it all off, the car companies and local dealerships get an increase in business, which hopefully sustains employment, or perhaps even increases it.

I can buy that perhaps the $4,500 per family may be a bit too much. The housing credit is $8,000 and that's for buying a house! So maybe in the Senate version they can approve the appropriation but perhaps lower the credit to $3,000, thus allowing more families access to this program. But I think killing it would be a bad idea.

Let me know what you think. I've posted a poll.

3 comments:

  1. I'm sorry to disagree with you, Ernie, but I really disagree with this program. It is good for car dealers and those taking advantage of the program, but bad for anyone else. The government shouldn't pick certain people (those who own "clunkers") and industries (the auto industry) to favor, and just transfer money from one taxpayer to another. Don't forget, for each person who gets a credit towards a car, we are paying for it in our taxes. Is if the stimulus spending wasn't ruinous enough.

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  2. And just because the program is being taken advantage of, doesn't mean that it is a success. If the government really cares about getting low mileage vehicles off of the roads, then this doesn't really get the job done. I can get a new SUV that only does about 18mpg and YOU will have to help pay for the $4500 i am getting from uncle sam.

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  3. Democratic administrations are not the only ones who pick winners and losers in terms of economic allocation of resources and tax dollars. Dems and Republicans just pick different things to spend it on. Republican administrations might spend the allocated money for domestic oil drilling or tax credits for coal and natural gas mining. Just because you disagree with the underpinning philosophy of Keynesian government intervention doesn't mean that this specific execution of it in this program is not working.

    I understand from the get-go that the government is taking my money to accomplish their objective, I just approve of the objectives this administration is setting, nor do I think it's a terribly radical goal in a deep recession. Do I think the mileage standards should be higher? Yes. Do I think the credit should be lowered and available to more people? Yes. But do I think that because the program worked quickly, it should be killed? No.

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