“Cash for Clunkers” Is Out of Money! So What to Do Now?

The “cash for clunkers” program has been a roaring success. in just one week Americans bought enough new cars utilizing the program that the NTSA said it was pretty certain it had exhausted the $1 billion that had been appropriated and was, therefore, suspending the program. Who says the government can’t do something right.

But now what do you do. Throw a bunch more money at the program when the budget is strained to the breaking point? I think it’s a no brainer for politicians. First, they’re going to be besieged with major league whining from constituents who missed out and of course it’s simply not “fair” that everyone shouldn’t have their shot. And, second, when you’re desperate for any little bit of positive economic news to feed the masses this is just too good to pass up. You get immediate press speculating about all those new car sales and when the monthly auto sales numbers come out they’re goosed to the heavens by the program.

You can count on this one getting more funding. Actually, if you do it right it might not be such a bad move. If you divert a couple billion dollars worth of unspent stimulus money it should do a lot more good than it will eighteen months from now funding some nebulous politically correct social program. What a novel idea, actually getting fiscal stimulus out the door and to a proven program. Never happen!

Now let’s throw a little cold water on this thing. The program is being credited with creating 250,000 new car sales. Assuming that somewhere around that number of clunkers were traded in, what’s happening to them. By law, I believe, they’re supposed to be reduced to scrap. I assume that means the dealers have to come up with a piece of paper proving they went somewhere that would happen.

Do you think that 250,000 cars in a week were shipped off to the nation’s junkyards to be rendered? More to the point, do you think that the government has the ability to ensure that the law has been complied with? I suspect you’re with me by now. There are probably a lot of clunkers out there that are going to slip through the cracks given the speed with which all of this is happening. Someone is going to make a lot of money off of this with the government footing the bill.

That might not be all that bad, though. Think of the secondary stimulus when a lot of pirate clunkers creep back into the auto fleet. Just keeping those puppies running is going to fill the pockets of a lot of mechanics.

more: here

Update: I told you they wouldn’t let this little political jewel die. Just in from Reuters:

The U.S. government will not suspend its $1 billion “cash for clunkers” auto sales incentive even though confirmed sales and pending transactions neared the limit of 250,000 vehicles much sooner than expected, an Obama administration official said on Thursday night.

The White House was working with Congress to try to extend funding for the program, said the official, who was not authorized to speak for attribution.

Now, where does the money come from? Please just divert existing stimulus appropriations!

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About Tom Lindmark 401 Articles

I’m not sure that credentials mean much when it comes to writing about things but people seem to want to see them, so briefly here are mine. I have an undergraduate degree in economics from an undistinguished Midwestern university and masters in international business from an equally undistinguished Southwestern University. I spent a number of years working for large banks lending to lots of different industries. For the past few years, I’ve been engaged in real estate finance – primarily for commercial projects. Like a lot of other finance guys, I’m looking for a job at this point in time.

Given all of that, I suggest that you take what I write with the appropriate grain of salt. I try and figure out what’s behind the news but suspect that I’m often delusional. Nevertheless, I keep throwing things out there and occasionally it sticks. I do read the comments that readers leave and to the extent I can reply to them. I also reply to all emails so feel free to contact me if you want to discuss something at more length. Oh, I also have a very thick skin, so if you disagree feel free to say so.

Enjoy what I write and let me know when I’m off base – I probably won’t agree with you but don’t be shy.

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