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.