Cash for Clunkers
One of these days there will be one of these stimulus programs for which I can qualify, but I haven’t found one yet.
The "cash for clunkers" program is a genius idea that gives people a credit of $3,500 to $4,500 to trade in their old car for a newer, more fuel efficient model. There are restrictions, of course. The “clunker” has to get less than 18 miles per gallon (combined) and be less than 25 years old. You have to buy from a participating dealer, and the credit does NOT count as income for tax purposes. Dealers also have to give you any other rebate or special offer.
So, here we go again. I don’t have a clunker. Well, I kinda do, but I’m not ready to part with the Explorer, and it’s really not a clunker. Besides, the last thing I need is another payment, and my clunker is paid for.
I realize that the car business is in the doldrums. And I guess if the government mostly owns the car companies, at least the American ones, they can offer a rebate program if they want. Of course, it’s not just GM or Chrysler cars that are eligible.
But it’s not just the car business that’s in the doldrums. Lots of businesses are in the doldrums. And there are a lot of people in the doldrums as well.
Now consider for a moment that the people who are driving these so-called “clunkers” may have some difficulty qualifying for a loan. They may, in fact, be the least able to make a payment. It won’t be the case for everyone, of course, but I’m thinking that even if I HAD a clunker I was interested in trading in, the last thing I need at the moment is another payment. I wonder how many of those new cars will wind up on a repo lot and then at the auction. Yes, it will reduce inventories on car lots, but is it responsible? I guess we won’t know for a while.
Meanwhile, I’m not only paying for my car, I’m helping other people buy cars too.
I’m helping people buy a lot of things. For instance, there’s a tax credit for first time home buyers here in Florida.
And so it goes. One program after another that leaves out people who are struggling and barely getting by, but they are getting by. I understand that helping people buy cars helps the workers who make the cars and all the ancillary jobs associated with that. But I’m not at all convinced that the government is going to spend us out of this recession. The way to spur businesses to hire workers and invest is to cut business taxes. When you look, historically, it works every time. Business could spend us out of this recession, given an opportunity, but government? Color me skeptical.
President Obama said Friday that signs are pointing to a recovery. The unemployment rate fell to 9.4% nationally, and fewer job losses were reported, but there are still losses -- 247,000 newly unemployed in July, which is better, but still not great. Much of the workforce still wonders if this week will be their last at their job. Helping someone buy a new car might increase someone’s personal consumer confidence, at least in the short term, but how confident can you be when the only way to clear automobile or housing inventories is to wait for the government to hand you money to do so. What happens when those programs go away? Do people then put off a major buying decision waiting for the next government program?
The way to end the recession, it seems to me, is for people to be back at work earning enough to pay their bills. Businesses have to feel confident that they’ll be able to sustain their workforces before that situation will begin to stabilize. “Cash for Clunkers” makes a great sound bite, and in the short term, might at least move some inventory off car lots.
But in the end, is it an economic Twinkie? Momentarily satisfying, but very little substance and requiring several hours penance at the gym? The buyers trading in their clunkers need to be sure they’ll be able to keep up the payments, and that part is, at this time, far more difficult to sustain.