Car Guy

The Clunker Con

Uncle Obama's shell game is mainly for losers.

By 8.10.09

Send to Kindle

Of course the "cash for clunkers" giveaway is popular. The government is paying people to buy cars -- and subsidizing the "sale" of cars, thereby temporarily improving the fortunes of the auto industry.

But, is the program a success?

If the criterion is political, the answer would be yes -- at least in the short term. Thousands of people have leapt into the breach to grab their handful of free government money. No surprise there. It's not often that Uncle Sam gives average people serious cash as opposed to taking it out of their pockets. Only a fool would leave that Old Beast parked in the back yard to rot for another 10 years when all you have to do is break out the jumper cables and a can of ether and gimp it down to your local new car dealership and swap it out for $4,500 toward the purchase of a nice new ride.

Except, of course, it's these same individuals who have been taxed up and down the streets to provide the revenue that Uncle Sam then generously returns a portion of via the "clunker credit."

And, we're grateful for this!

It also probably hasn't occurred to the people trading in their "clunkers" for new cars that they are voluntarily signing up for a slew of new and higher taxes, too. By getting people out of paid-for and low-value older cars, the government knows it can extract a fortune in new sales and upticked personal property taxes.

Insurance companies are rubbing their hands together also, no doubt.

People of limited means trying to live within their means, on the other hand, are probably not. The pool of affordable transpo has just been reduced. Not just the total number of older cars -- but also the availability of second-hand parts to keep the remaining still-operable older cars operable. Every car turned in under the clunker program must be "recycled" -- that is, destroyed. This will exert additional cost-of-ownership pressure on the remaining older cars not crushed -- and thus, on the people of limited means who depend on them to get around (and who are not interested in a $500 per month new car payment).

To paraphrase the Queen of the Bourbons: Let them take the bus!

Meanwhile, the car industry.

It is indeed moving cars again. But that is not quite the same thing as selling them. What is happening is the government giveaway is helping to clear out the stacked-up inventory of brand-new cars that have been collecting dust on dealer's lots for months now. This gives the appearance of a recovery but once the giveaway goes away, so in all likelihood will the "recovery." And since Uncle Obama can't (we think) provide an endless 20 percent or so government-funded discount off the MSRP of every new car purchase, at some point, the rush to "buy" will be over.

Then we are back to where we were -- only the government (meaning, us) is now $3 billion lighter ($1 billion plus the additional $2 billion recently approved to finance the giveaway).

It's clever shell game, but ultimately, it's still just a large-scale con that's no different in principle from what you'd find going on in a Brooklyn back alley.

Nothing of real value has been added to the economy. Funds have merely been shifted and transferred. Taxpayers to taxpayers, taxpayer to car dealer, government to car dealer to car company.

Eventually, the music stops and the con is exposed.

Like this Article

Print this Article

Print Article
About the Author

Eric Peters is an automotive columnist and author of Automotive Atrocities: The Cars You Love to Hate (Motor Books International) and a new book, Road Hogs.