Jane Chastain : Politically Direct

“Cash for Clunkers” RIP

with 14 comments

The Cash for Clunkers program has come and gone and if you think RIP stands for Rest in Peace, think again.  It’s just plain old “rip” as in rip-off, a reverse Robin Hood, a giant hoax perpetrated on we poor saps known as taxpayers.

The final data is in.  Some  690,114 cars were sold that were subsidized by “we the people” to the tune of $2.877 billion dollars plus the cost of servicing the additional debt.  Our country is broke, remember?

The Obama Administration called the program “wildly successful.”   There is something seriously wrong with this picture.   

How can destroying perfectly good cars and enticing citizens who are already in debt into taking on more debt possibly help individuals?

How can grinding up cars that have many more serviceable years left on them, possibly help those who need cheap transportation?

And how does replacing a perfectly good used car with one that gets better gas mileage possibly help the environment?

The real answer to all of these questions is it does not.   The program is a sham!

“Waste not, want not” is an axiom that was taught by the previous generation.  It may have gone out of fashion but it is true!

According to the report “The Environmental Impact of the Car”  by Don Matthews and Andrew Rowell, before you can build a car you have to mine and refine  iron, steel, aluminum, copper, and platinum.  You must process  zinc and lead and produce plastics.  All of this consumes huge amounts of energy and releases CO2 into the atmosphere.

Bill Chameides, dean of Duke University’s Nicholas School of the Environment, estimated that the amount of carbon dioxide released during the production of a single vehicle is about 6.7 tons on average and can climb as high as 12 tons.

So how many years would you have to drive a new, more efficient vehicle in order to recoup that much CO2?

Chameides ran the numbers for Greenwire, using this scenario:  A driver scraps a vehicle with the highest fuel economy allowed under the proposal and buys one with the lowest.   The payback period for a car is five years, 10 years for a small truck and about 14 years for a large pickup.

Since the current median lifetime of a car or truck falls between 8 and 10 years, the impact on the environment is negligible at best, but what about the human toll?

Consider the average American who works one or two jobs just to keep his family afloat.  He already carries a home mortgage, perhaps a second, and a record amount of credit card debt.  His old car is paid for but the government lured him into buying a new car with a $3500 to $4500 check for the down payment.

If you factor in the cost of the loan and the depreciation on a new car, he lost that much or more when he drove it off the lot.  Furthermore, the average clunker buyer is stuck with a $400 car payment for the next three to five years, which will rob him of the ability to pay down his debt and build wealth.

The winners under this program are the Americans who can afford new cars.  Edmunds.com reports that  200,000 old, low mileage cars would normally be traded in every three months, in exchange for more efficient higher mileage cars, without the Cash for Clunkers program.  Furthermore, Edmunds found that at least 100,000 car buyers simply put off an earlier purchase to take advantage of this program.  Others made their purchases early.

The car companies that were doing well, continue to do well, Toyota, Honda, Subaru and Hyundai made gains.  Of the domestic car companies, only Ford came out a winner.  Sure, the Big Three brought people back to work, at least temporarily.  However, these are some of the most overpaid, coddled workers in the country and Cash for Clunkers simply allowed Detroit to kick its can further down the road, again.

The losers were the charities who depend on donated vehicles, used car and auto parts dealers, and repair shops.   Unfortunately, the biggest losers will be the individuals who have suffered the most in this recession and need reliable transportation.  With some 700,000 cars that normally would be in the used car food chain taken off the market, the cost of used cars and replacement parts will go through the roof.

Cash for Clunkers is Obama’s biggest success story.  What can you expect from a guy with no business experience who never ran so much as a candy store?  It’s going to be a long four years.

Written by Jane Chastain

September 3rd, 2009 at 12:00 am

14 Responses to '“Cash for Clunkers” RIP'

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  1. Jane, we are living out Ayn Rand’s Atlas Shrugged. If you havent read the 1200 page book, I would suggest you take a day and read it, and if you can’t read it in one day, get your congressman to read it to you, as it seems they are all speed readers.

    Darrel Mulloy

    3 Sep 09 at 10:58 am

  2. Jane, I certainly agree and the dumb masses want the government to run our health care system. If you have time, check this column from Canadian Free Press. http://www.canadafreepress.com/index.php/article/14089
    Jack Hurst

    William Hurst

    3 Sep 09 at 5:40 pm

  3. Hello, Jane,

    As you will note, my email address is and I cannot deny your description as “coddled workers”, something that has played on my mind the last 25 of my 38 years in the auto industry. However, I have reservations about autoworkers being called overpaid.

    This country was doing well with our manufacturing backbone. Our industries – including the auto industry – brought us through 2 world wars in good health. The higher wages afforded auto workers proved Reagan’s “trickle-down” effect. Our wages saw us buying more autos, resulting in more work for us, more work for suppliers, more work for the industries that built the steel, trains, trucks, rails and roads, and yes, even ships, that trickled down to all in the form of higher wages. America developed a middle class and a more approachable goal for the lower class to aspire to and a wealth allowing the autoworkers to send their children on to higher education, thus vacating the jobs for the lower class to move in. I am 57. When I looked for a job fresh out of high school I could find a job within knocking on 3 doors, and that job would be a well-payed manufacturing-type of job, whether auto plant, parts plant, steel industry, parts stamping plant, or auto maintenance shop. This was possible because of us coddled workers. Stores paid more for sales staff and stock boys because they had a wealthier customer and had to compete with industry for employees. All benefited. The question is what went wrong there? Was it the power of the auto unions threatening to shut-down production if it didn’t get pay raises? Our production always increased, albeit usually as a result of better machinery, better welding guns, the introduction of robots. =>

    Did you ever work on an assembly line? The constant noise all around, the pounding of spotwelding guns or machines stamping parts; the smoke and pastes and chemicals splattering us as the welding tips pinched the metal together; the hot sparks falling down the back of your shirt or inside your boot; the razor sharp pieces of metal as you flung the parts from one machine to the next, one pile to the next, or out of the pile to load into the framework of what held the multiple parts of the car together as it grew into a product; the 85 degrees outside/110 degrees inside with a 24″ fan 40′ away being your only relief; with sweat running down your shirt, your arms, into the hard, recycled leather gloves the company supplied with patches and seams rubbing blisters on your hands and the gloves becoming so wet with sweat that the big spotweld guns would send a jolt of electricity into your palms each time you fired a weld off? How about needing the restroom and the foreman, if he bothered answering your whistle hanging down the line, telling you to just wait because he didn’t have a spare man to cover your job while you went; or finding out that night when you got home that an emergency call was placed to you but your foreman ignored it because his spare man had to cover the job of the drunk that was being hidden so the foreman didn’t look bad to his supervisor? How about coming in at the exact time because when that whistle blows you had better be in you assigned job position with gloves and glasses on ready to position and fire the welding gun or the foreman would write a reprimand on you? No time for chatting with friends, sharing a cup of coffee before walking off to your work station. And, once the line starts it keeps coming and coming and coming. One and one-half hours into the shift the line stops for 6 minutes. Now you can get a snack, a coffee, or run across the shop in hopes of getting a stall in the restroom that doesn’t have shylocks and/or drug dealers “teaching” someone a lesson. Then the line starts again and somewhere in there a relief man shows up and gives you 20 minutes relief time to run to the front of this mammoth building to stand in line at the payphones, or to go find a friend who is still working on the line and trying to have a meaningful conversation with him. Then back to your job until lunchtime. If you’re lucky this plant will shutdown for 30 minutes lunch and you run out to the parking lot, jump in your car, drive to McDonald’s, or Burger King or one of the local catering bars, getting food, and getting back again before that line starts up again. If your plant is a three-shift operation you only get a 20 minute lunch. Three shift means you work 8 hours – period! No overtime unless asked to work the week-ends. At a two-shift plant such as I worked at, we would come back from lunch and have no idea how late we would work. Depending on the orders, the parts delivered, it might be a 7 1/2 hour night or they might keep us for 10 hours. If there was a line break-down that day they might keep us for 12-15 hours! Or you might be scheduled for 12 hours “indefinitely”, which means it could be the next 3 days or the next 3 months, and try to fit your home/family/social life around that! The answer was pay: double time, triple time; not because we were expected to work harder, but because they were buying our lives from us, hours that we could never reclaim. Do you know that each and every single person who worked on an auto assembly line shared the same dream after the first night? You would wake up in the middle of the night and your arms were extended and you would be going through the motions that you had made for the 8-10 hours over your first day! Yeah, coddled.

    <= So, what happened? Who decided to send our parts work overseas and over borders to people who work for $5 a day, $3 a day, a bowl of rice a day, or the chance not to be whipped or kept in solitary confinement? And how many car sales were lost because employees jobs were lost to these people? And how many parts plants and outside shops were closed because of that same foreign competition? And how many plant managers and CEO’s lost their jobs or had their pay cut – oops, none. They were given golden parachutes, lateral promotions, or sent to Asia to oversee our lost jobs. I once read that Dentistry was not such a great profession. People only went when they had toothaches. Then, thanks to Nixon’s wage controls we got healthcare, and the Union (Socialist planning?) bargained that into dental care. Now we go to the dentist twice a year just for a cleaning and check-ups – for free. But when an area has massive lay-offs all those dentists go wanting. No one wants to pay their rates when they can brush at home. They wait for the toothaches before calling.
    How many anti-Constitutional Federal regulations were passed hampering the auto industry while burdening them with the welfare of any “union” employees that might not be needed any longer because of lost sales? Where does the Constitution allow OSHA to come in and fine a plant hundreds of thousands of dollars becaues their “college field agents” who never saw a press, or punch or band saw thought it sounded scarey and wasn’t sufficiently protecting the operator because one out of hundreds of employees nipped a finger?

    Yet somehow, its “our” fault. Us greedy, coddled union workers. One time the Union saved my job because I wasn’t “pals” with the foreman. The rest of the time the Union was an albatross, a “tattoo” that I had to wear to show I belonged. I had no choice in that. I suspect the Socialists that snuck into this country way back in FDR’s reign have more to do with that – but us overpaid, coddled workers get the blame…. and lost our social life…. and missed our kids growing up because we were stuck on the wrong shifts at the wrong time.

    Jane, I was lucky. I made a pledge that I would get off the assembly line. I would either get a Skilled Trade, or quit outright. My education, God-given intelligence and talents, got me into the wood trade, and as technology killed off that trade, I sidled into CAM programming where I get jobs assigned by my supervisor. I turned in my job at lunch and he has been too busy to hand out another today even though I’ve been asked to work this Labor Day week-end, Saturday and Sunday; yes, at time and a half and then double-time. And so I get to write this to you. But please understand, the autoworkers are not the bad guys we are made out to be. We earn our pay, or did in the past, by selling our souls. And then the stock holders, the CEO’s, the CFO’s, sold out our work. We are all guilty, I bought Taiwanese wood-working equipment for my home because I couldn’t afford American made machinery and didn’t have the time to chase classified ads to get the deals. So I put a nail in the American machinery worker’s coffin. But who sold out our middle class to Mexico, South America, Asia?

    Bro'Ken

    4 Sep 09 at 5:46 am

  4. Hello Ms. Chastain;
    Once again you nailed it.
    We did not jump into the C4C debt wagon, though on the surface it could seem tempting.
    We have two Jeeps with over 175K miles on each. A 1993 Wrangler (my toy) and a 1999 Cherokee for family stuff. My son is already too tall for the back seat of the Cherokee. He is only 14 and not done growing yet. My daughter will be too tall very soon.
    So there is a modicum of justification to buy a new vehicle. But there are only a handful of vehicles that claim 30MPG highway that will fit our family. None that claim higher than that. Minivans don’t get more than 24 or 25MPG highway.
    But Our Dear Leader has the audacity to demand that the average fuel efficiency be increased to 38MPG.
    Where this leads me is to the belief that Our Dear Leader sees C4C and increasing CAFÉ as part of his plan to reduce the health care expenditures.
    C4C bribed people into buying smaller, less safe cars than they would otherwise have bought, trading in the larger safer cars. Down the road, he is trying to eliminate choice for the normal families in a way that could force the need to buy and drive two cars because one family size car will be so expensive.
    The end result will be more crash fatalities. And fatalities cost less to treat than crash survivors.
    I have been in two crashes in my Jeep Wrangler. One when a Honda Civic lost control on the highway and came straight across my lane. The Honda waste totaled. I had less than $800 in damage. Luckily there was no passenger in the Honda because that seat was crushed. I can only imagine how bad it would have been if I was driving something just a little bigger. There were no serious injuries this time. Thank God.
    The solution from the left is to ban big vehicles. Absent that, make bigger vehicles so expensive that only the wealthy and ruling elite can afford them.
    But that won’t change the fact that the odds of dying in a single vehicle crash are 3 times higher in a small car, like the Toyota Yaris, than even a midsized car, like a Ford Taurus.
    I can’t even fit in a Yarus, never mind my whole family. But that is what Our Dear Leader is trying to push.

    Bro’ Ken. It is the union that sane people have a problem with. Not the line workers. Unions exist for only one reason today. Extort wages and benefits far above market rate and suck union members dry while the union execs live high.
    Heavy handed regulation pushed manufacturing out of the US just as regulation is responsible to the shortage of doctors, nurses and the high cost of medical treatment. Large companies contribute and unions because they know that regulations keep smaller non-union competitors out.

    fishydude

    4 Sep 09 at 11:36 am

  5. Jane, you raise excellent points regarding the clunker cars. But in all the official excitement over the environment and manufacturing jobs, why hasn’t anybody looked into the prices of those cars? If dealers are the opportunists I believe, they raised the prices three or four thousand dollars the minute they learned of the rebate — so that the buyers are not getting a bargain at all, despite the subsidy from us taxpayers.

    Yale Woodford

    4 Sep 09 at 3:57 pm

  6. Someone has. Edmunds.com, the premier online resource for automotive information, estimated today that the average automotive manufacturer incentive in the U.S. was $2,475 per vehicle sold in August 2009, down $231, or 8.5 percent, from July 2009, and down $327, or 11.7 percent, from August 2008.

    “In March, the industry spent a record $3,165 per car, but since that time incentives have continuously fallen,” stated Jessica Caldwell, Director of Industry Analysis for Edmunds.com. “Supply is low right now since Cash for Clunkers depleted the small inventories generated during shortened production runs earlier this year, but I expect we’ll be telling a very different story in the months to come.”

    If you go to the Edmunds website and check under “Press Release” you will find other CFC data.

    A press release for July 27 states: Edmunds.com, the premier online resource for automotive information, has determined that even if Cash for Clunkers reaches its budgeted cap, the program will only help drive about 50,000 incremental new car sales, so each one will cost taxpayers a whopping $20,000.

    How is this possible? Edmunds.com’s research shows that typically 200,000 vehicles worth less than $4,500 are traded in for new vehicles every three months. At best the current Cash for Clunkers program will fund 250,000 such transactions in the same time period — a gain of only 50,000 vehicles. Given that this program is budgeted to cost $1,000,000,000, this increase will come at the cost of $20,000 per extra sale.

    “The incremental sales will be limited and at a considerable cost. In effect, we are paying consumers to do something most would do anyway,” said Jeremy Anwyl, CEO of Edmunds.com. “So as a stimulus, the program fails. One could make a slightly stronger argument about the environmental benefits, but even there, the program could have been better designed.”

    Jane Chastain

    4 Sep 09 at 4:22 pm

  7. Jane,

    I’ll be quick to the point: OBAMA HAS SOLD US A BUNCH OF ROTTEN LEMONS! And no, I didn’t fall for his quackery!

    Edward

    4 Sep 09 at 5:33 pm

  8. So let’s see…

    You got $3500 to $4500 for your ‘clunker’ If your clunker was worth $3500 and the feds gave you $4500, OH boy, you think you made $1000

    The dealer raised their selling prices at MSRP ($2000 to $3000) for the new car you could buy at a lower negotiated cost. However, you have to pay taxes on the $4500 come April 15th (something that no auto dealer will tell you). If you are in the 30% tax bracket, you will pay $1350 on that $4500.
    So, rather than save $1000, you actually pay an extra $350 to the feds plus you probably traded in a car that was most likely paid for. Now you have 4 or 5 years of payments on a car that you did not need. I’ll bet that old car was costing you less to run than the payments that you will now be making.
    But hold on, you also got ripped off by the dealer.
    For example, The Ford Focus with all the goodies sold for $12,500 the month before the “cash for clunkers” program started. When “cash for clunkers” was offered, the dealers stopped discounting them and sold them at the MSRP price of $15,500. So, you paid $3000 more than you would have the month before. All the dealers played this game when the ‘clunker’ program came along.

    So here’s what it cost the buyer:

    You traded in a car worth $3500
    and got a discount of: $4500
    Net so far +$1000

    But you have to pay: $1350 in taxes on the $4500
    Net so far: -$350

    And you paid: $3000 more than the car was selling for the month before
    Net -$3350

    So who actually made out on the deal? The feds collected taxes on the car along with taxes on the $4500 they “gave” you. The car dealers made an extra $3000 or more on every car they sold along with the kickbacks from the manufacturers and the loan companies. .

    Obama and his band of merry men convinced Joe consumer that he was getting $4500 in “free” money from the “government” when in fact Joe was giving away his $3500 car.

    Rich

    5 Oct 09 at 10:00 pm

  9. I missed your article on the Cash for Clunkers when it first came out. Now, I have just read something I think you’d find interesting.

    The UCDavis Magazine printed an article (Fall, ’09) titled A Costly Way to Cut Carbon. It reported that UCD Associate Professor of Economics Christopher Knittel studied the cost per ton of reducing the greenhouse gas CO2 via the Cash for Clunkers program. The article states that the program was paying “at least 10 times the ‘sticker price’ to reduce emissions of the greenhouse gas carbon dioxide”. Carbon credits will be sold for about $28 per ton in the U.S.. The article said Knittel concluded that “even the best-case calculation of the cost of the clunkers rebate is $237 per ton” of reduced carbon dioxide. “More likely scenarios” of driving habits and mileage estimates led to estimates in excess of $500 per ton, “even when we accounted for reductions in pollutants other than greenhouse gases.” Knittel is also a faculty associate at the UCD Institute of Transportation Studies and serves the university’s Sustainable Transportation Energy Pathways Program as the policy and business strategy leader.

    Kathy Twisselmann

    27 Oct 09 at 8:22 pm

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