Honk If You Can Afford Another Car Payment

As you’ve undoubtedly heard by now, before heading back home to see their well-dressed, Nazi-sympathizing, angry elderly constituents concerned about the future of their health care, senators on Capitol Hill last night approved another two billion dollars for the “Cash For Clunkers” program which was the toast of the town while I was gone in Poland.

The program has been hailed by people on all sides of the political aisle as the best thing since Al Gore invented sliced bread and Barack Obama squeezed crude oil from wind turbines, but I don’t get it.

Even Larry Kudlow was lauding the program in a piece at Real Clear Markets:

In virtually no time, the clunker program has become a national pastime. It has captured the public’s imagination in a way that no other federal stimulus has. Everyone is talking about it. And I truly believe that consumer spirits have been buoyed by the prospect of going out and buying a new car — even with federal assistance, and even under the duress of federal mileage standards.

After a very dreary year or two, people might just have fun trading in their clunkers and buying something new.

Even today, as unfashionable as it sounds, and given Washington’s attack on horsepower, Americans are still in love with automobiles. They still like going to showrooms, checking out the new models, inhaling the great new-car smell, and yes, kicking the tires and making a buy. Cars may no longer be the heart of our economy — that’s all techie, information gadgets now. But folks still love the car thing.

Now, I wouldn’t want the government to pass out free money for everything. But in this particular case, the cash-for-clunkers rebate program is working. It’s working so well that it’s running way ahead of the computers that are administering it at the Transportation Department and Citibank.

Well, sure. That’s government for you. But unlike most of the rest of the fiscal-stimulus plan, this program actually works because the federal cash rebate actually contributes to a consumer purchase. It’s not just another welfare-type transfer program.

I get that the CARS program sold cars. I understand that, and understand why. Even my wife asked me, last night as the news of the $2 billion extension rolled across the television screen, what I thought of our aging minivan. After a second of irresponsible thought, we both agreed that until the minivan starts costing more to service, repair and maintain than a small payment on a newer vehicle, it’s better to have no car payment on one of our two cars.

And that’s the crux of the issue, isn’t it? While I wonder about the effects on the used car market and the consequences with regard to the bottom line for those in the salvage business, my biggest concern is that the Cash-For-Clunkers program, regardless of how popular and successful it may seem on its face and in the short term, not only purged the new-car market of consumers who would potentially be buying a car later, but more importantly made sure that those who took advantage of the program who were not in a position to buy a new car in the near future, people who might have been having trouble making rent or mortgage payments in the first place, were suddenly saddled with a new lump of debt and a new car payment they would not have otherwise had.

Our founders likened debt to bondage. George Washington warned in his farewell address that America and Americans should avoid the accumulation of debt. Thomas Jefferson, who knew quite a bit about both bondage and debt (he was indeed a slaveholder and, privately, quite a spendthrift), nonetheless said that “[t]he maxim of buying nothing without the money in our pockets to pay for it would make our country one of the happiest on earth.” The famously frugal John Adams deemed a culture of debt as the easiest way to “enslave a nation.”

So, yes, the CARS program might have provided a short-term band-aid to a floundering automotive market, and it might have made a negligible difference in fuel economy on American roadways, all of that came at the expense of a increased debt burden at a time when unemployment is on the rise, the value of the dollar is decreasing, and the economy is teetering on collapse. Inasmuch as the federal government foisted auto loans upon many people who should not have been borrowing more money, much the same was done with the auto industry as was done during the 1990s for the housing market. And we see where that got us.

Government has no business in the automotive business, just like it has no business in the housing business, or the healthcare business. If the federal government would just maintain a laissez faire approach to governance in the first place, none of these populist remedial measures would have been necessary at all.

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Comments

  1. Samuel Fain says:

    It's a simple two-step plan.
    1) Take money from people X
    2) Give people Y free money taken from people X in step 1)

    As a result, you own people Y.

    It's that simple.

    If while doing that you can get people Y into debt, that's even better, since when they can't make payments, you can "save" them by giving them even more free money taken from people X.
    As long as Y > X, and the ideals of self-reliance and basic decency have been brainwashed out of Y, this cannot fail.

  2. goddessdivine says:

    This program will have disastrous effects. As you pointed out, the auto market will eventually burst (much like the housing). This is just another bailout scheme that will encourage people who shouldn't be taking out loans for cars to go into further debt. Also? What about used-car lots? Or those folks who can only buy/drive those so-called clunkers? So much for helping 'the little guy'.

    All this in the name of going green, when it's been said that this will hardly have any effect on the environment whatsoever. What a joke.

  3. PONTIAC, NOW A CLASSIC says:

    Proudly driving a 1996 GM clunker, and you'll have to pry it from my cold dead hands.

  4. Gail B says:

    I'm enjoying no car payments.

    Samuel, you're right on the money!

  5. BAD DOG says:

    Teacher, the dog ate my algebra homework. I thought it was a valid equation.

  6. Anonymous says:

    where are the bright minds of this administration????????????

    a country in dire financial straits.

    = 9.4 JOBLESS

    = donations to charities waaaay down.

    here you have people turning in cars to purchase another one. yes, they have to turn it in as proof they owne the car, but WHY ON GOD'S GREEN EARTH DO THESE (MANY LATE MODELS IN GREAT CONDITION) just why are these cars being trashed??????

    didnt it dawn on a SINGLE mind in this administration to donate these cars to families, and charities who can't even afford a car??????

    the things this administration does leaves me speechless sometimes!!

  7. Fernley Girl says:

    When I bought my current vehicle 7 years ago I researched and test drove several vehicles. I looked up the safety ratings and compared mileage. I made a responsible purchase. Now, when I might have considered a new purchase, I don't qualify. My mid-size SUV gets a combined mileage of 22.6 MPG. I get to keep my vehicle because I was responsible, and get to pay for someone else to buy a new one. Gee, I love how Obama spreads my wealth around.

  8. Anonymous says:

    CARS is one of the most poorly thought out programs ever. 55 percent go to foreign brand name cars and wheter we like it or not they will take those profit overseas.
    People that cant afford to buy a car will not be incentivized by this program so it helps those who need it least.
    Finally the 3 billion dollars that the public debt has increased because of this program need to be paid back and will do nothing to insure that the 50 billion invested in GM and chrysler insures that the public will ever see that money comming back.
    Obama's got to go!

  9. Anonymous says:

    CARS is one of the most poorly thought out programs ever. 55 percent go to foreign brand name cars and wheter we like it or not they will take those profit overseas.
    People that cant afford to buy a car will not be incentivized by this program so it helps those who need it least.
    Finally the 3 billion dollars that the public debt has increased because of this program need to be paid back and will do nothing to insure that the 50 billion invested in GM and chrysler insures that the public will ever see that money comming back.
    Obama's got to go!

  10. STUPIDITY WON says:

    this from the most poorly thought out election.

  11. MEET AT THE NW GATE says:

    Please, call me Sam. Samuel is the name on my FEMA camp ID. And please, set your phasers on 'stun' when you come to bust me out, I've grown close to some of these Marines guarding me.

  12. Rix says:

    There is little to discuss here. The program has clearly nothing to do with stimulating the economy, helping dealers, oil dependency, common sense or even that Global Warming nonsense. It is about scratching UAW's back by giving them a tremendous sales boost to keep the bastards afloat until they come up with Obamobile tin can design – at which point they'll get more money for their "spirit of innovation and immense contribution to the environment".

    There is one thing that I totally don't understand. Were I being robbed in a subway train, I'd put up quite a fight. Heck, I'm THAT stupid: if I were alone I could even die there rather than willingly part with my valuables. But when we, as a nation, are being robbed – not even at gunpoint YET, mind it – and we are not even allowed to talk violence. Not allowed BY WHOM? By the law, which is blatantly trampled by the other side at every opportunity? By the media, which hates us regardless of what we do or don't do and doesn't even pretend to make it a secret? Every bully's worst nightmare is that his victims suddenly start fighting back in earnest. Democrat thugs are nothing but bullies – and we'll keep parting with our lunch money until we stop TALKING back and learn FIGHTING back and BE PROUD of it.

  13. Celia in TX says:

    Their whole claim of doing Cash for Clunkers to save emissions completely lost all credibility when they just now set out to be 3 new Gulfsteams.

  14. linda says:

    My husband and I have owned a auto auction for 11 years that we are having to close because the auto industry is so screwed up. Cash for Clunkers was pretty much a nail in the coffin. Now the perfectly good cars that we normally would get to sell are being crushed or dismantled! Unbelievable. I agree that this is only good for the unions! So much for small business again! Like the t-shirt says, "One Big Awful Mistake America"! (OBAMA)

  15. Claudia says:

    I wonder what those dalers will be yelling when they get taxed on that $35-$4500 that the Gov't is crediting them towards the customer purchasing those vehicles, especially when they are most all giving an added amount close to equal the Gov't fund that is going to be billed to their ANNUAL TAX for the year…… sos they are losing about $7-$9000 per vehicle off of the sticker price, paying their salesmen, and then giving back money that should have not been charged to them…. as that pesky little income tax or earned tax.

  16. Anonymous says:

    so when do we get hit with the bail out for when these patriotic Americans can no longer afford that new car payment. Also, don't forget what the full insurance cost is on a new car. So it is not just the payment, it is the tax, registration and insurance.

    Can bet they didn't even consider those things when they went to get their free government car.

    Can't wait for barney frank to step up and save the day with another fannie mae er… cash for clunker bailout, just in time to save Christmas.
    oops sorry I meant save "winter holday" wink wink.

  17. PSYDOG says:

    I would like to see the honest numbers on the amount of people who could not afford more debt that went out and traded in and bought the new cars? What happens when they default on the new loans they can't afford because they lost their jobs in the rise of unemployment?

  18. SELF CENTERED says:

    Who in their right mind can get excited over a $4,500 rebate that is billable to our grandkids…. I just don't get it, sorry.

  19. Cars4Charities says:

    Cash for clunkers is killing charity car donation since the amount of the voucher is so much greater than the tax deduction. All the politicians were told this would happen when the legislation was first purposed. All we wanted was for them to give the C4c cars to charity and let them decide what to do with them. Cars that are real clunkers would be scrapped. Those in good shape would be sold with the proceeds used by the charity or given to a needy family. This program is so wasteful.

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