« What Are You Listening To? | Main | Cash for Clunkers 2 »

August 02, 2009
Cash for Clunkers

The Obama administration's "Cash for Clunkers" program has been dominating the news lately. This program has some serious problems.

One is that it's easily scammed. Sell your old car, buy a Prius, get $4500, sell the Prius on CraigsList for $1000.00 off list, buy an Escalade for, effectively, $3500.00 off.

Secondly, through some weirdness in the mileage ratings, cars older than 1984 vintage are not actually included in the program. That's right, in typical Orwellian Obama doublespeak, real clunkers are not clunkers, but late model cars are. I was especially disheartened to learn that my very own 2000 Audi A6 Avant is officially considered a "clunker" by the Obama administration.

Third, the program rewards as little as a 1 or 2 mpg improvement in mileage. Given manufacturing variations and individual driving style variations, that is deep in the noise.

Fourth, part of the program involves actually destroying the target vehicle. Yes, that's right, destroying the vehicle. The process is very specific: replace the oil with sodium silicate (aka liquid glass) and run the engine until it overheats and seizes up. Here is how it's done on a late model Volvo S80 in great condition:

YouTube: Volvo Cash for Clunkers Engine Disabling

Unbelievable that a stunningly beautiful work of engineering is destroyed for no reason whatsoever. I mean, you can't help but compare this to burning books, smashing rock'n'roll records, or the Taliban dynamiting the Buddha statues. Does anybody think for a moment this is a good thing?

Here's more:

YouTube: Cash for Clunkers: How to destroy an engine

YouTube: Cash for Clunker Engine Stop, Lynch GM Superstore

Just a reminder: Cash for Clunkers Requires Destroying Perfectly Usable Cars

For some more details, check this out:

Jalopnik's Guild To The Cash For Clunkers Bill

The original idea seems to have come from an article by economist Alan S. Blinder in the New York Times, July 27, 2008, called "A Modest Proposal: Eco-Friendly Stimulus". In it he claims that the program "holds the promise of performing a remarkable public policy trifecta -- stimulating the economy, improving the environment and reducing income inequality all at the same time".

I'm calling bullshit on economist Blinder. Yeah, I know he's got credentials up the yingyang, but this is ridiculous.

First off, the MPG rating on a car has far less environmental impact than how the owner uses the car. A driver employing a high mileage car for a lengthy daily commute will contribute far more pollutants than the driver occasionally hopping around town, even they're using a Hummer. The type of driving, smooth vs. stop-and-go, also has more of an impact. As does the driver's personal habits and the route chosen.

Secondly, the "reducing income inequality" claim (we all know that's code for socialism, but glossing over that for a moment...) is simply untrue. Lower income people, if they own a car at all, generally can't afford a new car, even with a rebate. Also, let's face it, because of a little thing called supply and demand (Could someone explain this to Dr. Blinder?) the retail price of new high mileage cars will likely increase following their demand, making lower mileage cars more affordable to first time buyers.

Thirdly, the stimulation will mostly boost the economy of Toyota and Honda, and not GM, Ford or Chrysler. (I forget, are they still made in this country?)

While I don't have Dr. Blinder's credentials, my own proposal A Modest Proposal to Improve the National Energy Policy is far superior, as it will seriously reduce gasoline pollutants, it costs nothing, and it doesn't involving trashing perfectly good Volvos.

[later addition:]

CNN reports some intersting things here [August 4, 2009, As Buyers Pull Up, 'Clunkers' Program Goes Into Overdrive]:

But what kinds of vehicles were being turned in?

"We're seeing Dodges, Fords, Tahoes, Suburbans, parked for ages," said Karl Jones, finance director at Team Toyota in Baton Rouge, Louisiana.

Got that? "Parked for ages" means that the clunkers were not polluting at all. So in these cases, the Cash for Clunkers program actually increases pollution. I hadn't considered that situation before.


"Southern California is amazing; people have more than one car here, so it's not down-on-their-luck people or poor people we're seeing," he [Mark Near, general sales manager at Bob Smith Toyota & Scion in La Crescenta, California] said.

Which runs exactly counter to Dr. Blinder's "income inequality" claim.

Posted by DonTillman at August 2, 2009 12:42 AM

Hi Don--I probably qualify as a pinko politically, but I found both this post and your Modest Proposal to be stimulating reading. Well written and presented, too. Thanks for sharing!

Posted by: J.G. Preston [TypeKey Profile Page] at August 2, 2009 08:46 PM

I just sold a 1990 honda accord for $300. It was not an approved clunker because the EPA rated it as getting 22 mpg, which perhaps might have been true when it was new, but it had almost 280000 miles on it when we bought it a few years ago, and if any vehicle was worth of being taken off the road, that one was. But it didn't qualify for the program. So as a result:
1) someone else is driving it
2) we bought another used car for $4000 that was more than 10 years old
3) we didn't buy a new car (blah blah propping up the economy, jobs, etc.)
So the program ended rewarding the wrong kinds of people, those who were inconsiderate and thoughtless enough to buy a gas guzzler, who have enough money to buy a new car anyway, and penalized those with limited financial resources who attempted to buy a thrifty older used car.
I don't think the program was completely without merit, but there are a lot of people who will go through their entire life never buying a new car, and the authors of these incentives apparently don't think it is worth their effort to distribute the incentives around to those who will never be able to buy a new car. If they had paid me $300 to junk my very old jalopy instead of selling it, so I could apply it to an affordable used car, I think everyone would be farther ahead.
I see this in many government programs that affect me. Big subsidies for owners of apple orchards with more than 10 acres of trees, whose owners have the resources to hire workers, and nothing for those of us with a single acre of apple trees that we manage single handedly.
Frugality is seldom noticed or rewarded by bureaucrats.

Posted by: antfarmer [TypeKey Profile Page] at August 2, 2009 09:38 PM

Thanks so much for the kind words. Yeah, lately I've been fascinated by the math behind economic issues. Solving economic problems turns out to be somewhat similar to engineering.

Ant Farmer Dave makes several profound points. Especially that stunning last sentence.

Indeed, if you examine the situation from their position, bureaucrats have a near-zero incentive to notice or reward frugality. Meanwhile folks like you and me depend upon frugality in our daily lives.

Posted by: Don Tillman [TypeKey Profile Page] at August 4, 2009 11:25 PM

Post a comment

Thanks for signing in, . Now you can comment. (sign out)

(If you haven't left a comment here before, you may need to be approved by the site owner before your comment will appear. Until then, it won't appear on the entry. Thanks for waiting.)

Remember me?