The American Spectator : The Spectacle Blog : Automakers Win; Taxpayers, Poor, and Mechanics Lose

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The Spectacle Blog

Automakers Win; Taxpayers, Poor, and Mechanics Lose

By Doug Bandow on 8.6.09 @ 8:04AM

The "Cash for Clunkers" program is a good example of the sort of program which gives special interests a reason to exist--cash distributions to members at everyone else's expense.

The taxpayers are the most obvious losers, out $3 billion once the Senate Republicans sell out yet again by approving a big spending Democratic initiative. So are poor people, who will find fewer cheaper used cars available. But in the Obama administration's view, they should be taking buses anyway.

Then there are the mechanics. The federal government is using their own money to put them out of work. Such a deal. This apparently is "change we can believe in"!

Reports the Wall Street Journal:

The loss of such potential work -- as many as 250,000 vehicles will be destroyed in the program's first round -- prompted Mr. Wiygul to question the federal program's focus on dealers and big business at the expense of the little guy.

"How do we get on the special interests, special treatment bandwagon? How much is it going to cost me and to whom shall I send the check?" he said. "Who picks the winners in this game 'cause obviously the game is fixed."

Betty Jo Young, co-owner of Young's Automotive Center in Houston with her husband for 35 years, said her concern is that the federal program, unlike her state program, AirCheck Texas, doesn't give car owners the option of repair. The Texas program, created for low-income residents, provides $600 vouchers for repairs to bring older cars up to emissions standards. Participants have to make a co-payment of $30. It also offers up to $3,500 to replace the vehicle.

"I have found my customers want to keep their cars. They're doing good to make the $30 co-pay, much less buying a new vehicle," Ms. Young said. "Why aren't we putting money into repairs as long as the car is running?"

The auto-repair segment of the car industry, with about 164,000 independent shops, is a small portion of the automotive aftermarket that includes maintenance shops, parts suppliers and companies that remanufacture engine parts, among others.

The automotive aftermarket, a $250 billion industry that employs about 4.6 million people, could be among the biggest losers in the clunkers program, said Kathleen Schmatz, head of the Automotive Aftermarket Industry Association: "It's everybody from the Fortune 500 parts manufacturer all the way through the supply chain to the independent repair shop."

No one is surprised when Congress plucks taxpayers at someone else's expense. But they aren't the only victims of government bungling. As the "Cash for Clunkers" program demonstrates, Uncle Sam is well able to hurt lots of other people as well. Just ask your local mechanic.

View all comments (20) | Leave a comment

Crusader| 8.6.09 @ 8:54AM

Just wait about 6-12 months when folks who used this program to buy their cars find they can't make the payments, just like when the gubmint wanted them to all buy houses. I would get out of the auto repair business and into the repo business.

Bob| 8.6.09 @ 9:24AM

Bandow -- another dumb comment. First of all, there are over 135 MILLION

Bob| 8.6.09 @ 9:31AM

Bandow -- another dumb comment. First of all, there are over 135 MILLION automobiles in the U.S. This represents 2 tenths of one percent of them. There are plenty of old cars for the mechanis. Secondly, the poor are not going to buy new cars. Third, there are plenty of cheap old cars available that get over 18 mpg. In fact, they will get better mileage so the poor will not spend so much on fuel. Lastly, of all of the spending initiatives, this one puts the money directly into people's hands. You spend less money on your car and you spend more on consumption which will help the economy. Furthermore, people with money spend MORE on car repairs than people who don't have money. In addition, these cars will be used for parts -- the exact cheap parts that poor people use to repair their current old cars. Please think before you post unless you just like stupid talking points.

Tim| 8.6.09 @ 9:32AM

Bob that may have been your most concise post evah!

Tim| 8.6.09 @ 9:32AM

And then you ruined it.

Bob| 8.6.09 @ 9:44AM

Thank you, Tim. If I ruined it in your mind, then I made my point. The fact is I didn't like the stimulus plan at all. But if you are going to spend money, I prefer to put the money directly into people's hands rather than into government officials or bonus baby Wall Street types.

ncatty| 8.6.09 @ 9:50AM

One way to put money in people's hands is a tax cut or rebate.

Tim| 8.6.09 @ 9:55AM

Bob, I'm biased, I despise car dealers, new or used. I doubt much, if any of that money got past their sticky fingers. But maybe I'm just a cynic.

Bob| 8.6.09 @ 9:57AM

ncatty -- As I've shown on several occasions, on a macro basis tax cuts are not stimulative. This program IS a rebate. Here's a chart of GDP over time. Notice that at the time of tax cuts of Reagan and Bush, that you do not see the economy grow any faster than at any other time. In fact, the economy rose slightly faster under the tax increases of Clinton than any other President:

http://www.data360.org/dsg.aspx?Data_Set_Group_Id=230

Those people telling you that tax cuts are stimulative just are not looking at inflation adjusted data. My view is that we must stop talking about tax cuts and use taxes to pay for what we spend. Our emphasis should be on reducing the size of government. Let me put it this way, how are you going to get people angry about government spending if you don't make them pay for it? Let's pay for what we spend. To me, that is truly conservative.

Bob| 8.6.09 @ 10:00AM

Tim, I agree with you totally. That's why all of my car purchases over the past 10 years have been done over the internet. However, one of my daughters got the best deal over the internet and then went to her local dealer and he beat the price just to get the business.

Nelson| 8.6.09 @ 10:04AM

This program does hurt independent mechanics. New cars have new car warranties. Hyundai for example has a 10 year warranty- what are the odds of that car going to an independent shop while its still under warranty? Even 4 warranties are still a deterant for people not going to an independent. BMW has a 3 year maintenance free warranty, but when the maintenance free warranty is over people then learn how expensive it is to maintain a expensive car.

ncatty| 8.6.09 @ 10:17AM

Professor "As I have shown on several occasions" Bob, a tax cut may not stimulate you but it does me.

Bob| 8.6.09 @ 12:02PM

Nelson, consumption is 2/3rds of our economy. Are you against something that stimulates the economy far more than a repair? Besides, are you against warranties? Again, this is an infinitesimal part of the 135 million cars on the road. Mechanics will see very little of the pain.

ncatty - you show exactly what is wrong currently with the populism shown in the right wing movement -- it pays no attention to fact or truth. I became a Republican over 4 decades ago because it was the party of logic, truth, and limited government. The old line used to be that Dems used emotions and Republicans used brains. This is no longer true -- the Republicans use emotion (and belief) even more than Dems. If you are for tax cuts notwithstanding spending, then you are not a responsible person.

Blunted| 8.6.09 @ 12:52PM

Bob grew up in South Central so he knows better than the mechanics and the poor. He went to Harvard, so of course he knows better.

Bob knows everything, in fact, he's friggin' omniscient, his charts and graphs said so.

ncatty| 8.6.09 @ 3:19PM

Let me see, Bob became a Republican "over" 40 years ago because the Republicans were the party of "logic, truth and limited government." That would have been about 1969, right? I voted for Nixon but didn't delude myself that he was logical, truthful or for limited government. He certainly proved me right.

Bob| 8.6.09 @ 4:26PM

Actually, ncatty, it was in 1964 -- and my parents were both Dems. But I was strongly anti-Communist and joined the Army to fight in Vietnam and have always been proud of my service. I could never have become a Democrat with that perspective.

This country has provided me the opportunity to come from a poor neighborhood and end up going to the best schools and have great jobs. Now that the Republican party has been appropriated by social conservatives, it has gone down the tubes.

jhenry| 8.7.09 @ 2:20AM

The program requires the scrapping of your eligible trade-in vehicle, and that the dealer disclose to you an estimate of the scrap value of your trade-in. The scrap value, however minimal, will be in addition to the rebate, and not in place of the rebate.

Jhenry
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