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Cash for Clunkers

It’s always fun to play “guess the unintended consequences” whenever some new idiocy from Washington D.C. surfaces. The Cash for Clunkers program (CFC) will give between 3500 and 4500 dollars for cars with certain conditions (like low gas mileage) when they are traded in for new cars with better gas mileage.

Some think it’s a stupid idea, I agree.

But since the program is going through it’s important to note what problems it will cause. Here are my predictions as the program evolves:

1) A great number of cars not being used regularly will be turned in for the money. These are tertiary vehicles for people who rarely use them and taking them off the street will do no good since they are, well, rarely used.

2) Poor people will try to profit on their cars. People who drive older used cars with low gas mileage typically aren’t in the market for a new car. But, people buying new cars will want to get the full $4500 trade in value and will start buying these cars from those poorer people who need money more than a car. Prices for these cars will balance where both parties profit from the sale.

3) Poor people who need a car but who can’t afford a new car will have a more difficult time finding a vehicle. The so-called “clunkers” being turned in are usable cars and an important part of the economy. Where a teenager on a fixed income could count on a vehicle in the $1000-$2000 range, now will be paying double (if he can find a car at all).

4) As the program progresses there will be a shortage of low cost, high maintenance and/or high mileage vehicles. The working poor will be hardest hit by this, being forced to spend money on more expensive newer cars or being forced to waste hours of their lives on public transportation (rather than with their families or at second jobs).

5) The shortage of “clunkers” will eventually raise the price of these vehicles above the $4,500 subsidy. Older, high mileage vehicles will no longer be traded in because they have more value to those who need to drive used cars because they can’t afford new cars.

6) Remaining clunkers will not be taken off the streets. There will be fewer cars available to the poor and they will pay more for them. Democrats will take credit for saving the environment even though the program will have no measurable impact on anything.

7) Those of us who held unto our clunkers will enjoy a sizable ROI thanks to raising prices caused by the program.

The consequences of this bill are a mixture of subsidy and price floors and it will be fun to see how many people end being hurt by this. But hey, it’s all to reduce CO2 emissions by .000001% over the next decade and save ourselves .0001 degrees Celsius by the year 2100.

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4 Responses

  1. It looks like you have actually done the math on this! The changes to CO2 and temperature (assuming they are related at all– quite a stretch) look pretty close to right.

  2. You forget #8 which the higher education model gives us – when government increases student aid, universities raise tuition to ‘absorb’ the student aid dollars.

    8. New cars will increase in price by about $2k to ‘absorb’ the government subsidy. Thus diminishing the value of the program and making life harder for those without clunkers.

    • Right on. There are probably going to be people, because of this law, trying to buy a new car for the first time who will be swindled by an experienced carsalesman. No matter how you cut it, this program is worthless.

  3. “Democrats will take credit for saving the environment …”

    I think that is the one thing you can count on for certain. Regardless of how trifling the legislation ia in its real effects, regardless of the unintended consequences, and regardless of whether or not the proposed legislation even passes, the Democrats are going to claiim credit for the fact that temperatures have been going down for the last ten years. They aren’t out to save the planet, heck, they’ve already done it! It is the sheer power of their good intentions that matters, and so much so that they can alter history with it. It’s almost as if these aging hippies had a new mantra: “If it sounds good, do it.”

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