Imagine you’re a member of Congress. You’re a fan of the Cash for Clunkers program. You discover that the $1 billion that Congress budgeted for the program has been spent in FOUR DAYS. The program is now out of money. What do you do?
A. Realize that $4500 per clunker was too big a subsidy and that you can achieve the same effects with a much smaller amount.
B. Worry that maybe there is some fraud in the program and that some of the cash isn’t going to clunkers
C. Increase the budget by $2 billion
The correct answer for clunkheads is C, of course. That’s the wise choice when you are spending other people’s money. What fun that must be!
Share
Podcast RSS Feed
Full EconTalk Text
{ 1 trackback }
{ 81 comments }
← Previous Comments
You guys are hilarious. Muirgeo is an imbecile or that he is a complete liar. Either way, you should know this from the last 4 years. Even this post of his above is not new to Cafe. He accuses a centrally controlled and government mandated banking cartel a libertarian institution.
A person with no debt and a perfectly working car that runs probably 18 miles to the gallon, let's say replaces it with a brand spanking new car that costs $25,000, which probably gives let's say 30 miles to the gallon, let's also say that he drives 40 miles everyday or under $6 on gas daily. He will save about $2 dollars in gas or about $60 a month. However he/she, now, has $500 in car payment. Just as all the dumb people who keep buying shiny new car, he will regret his decsion when he start receiving the bills.
Don't forget that this guy has to get more than a liability coverage on his shiny new burden.
If they were worthless, you could ask the Federal Reserve if you can pick and choose which ones you can have and then they'd hand them over.
See, what's in the 'bag' are the bonds (used to finance home purchasing) that were sold to buyers who thought that it was a good investment. Also in the 'bag' were the insurance-like contracts that were used to compensate bond holders (the banks that sought these insurance-like contracts) in case the home-buyer defualted on his/her mortgage — the mortgage that was to repay the bond, periodically and with interest.
I was thinking that you probably didn't understand this fully. Now, with this new knowledge, can you think of a reason why the Fed Cheif might not want to be forthcoming about what's really in the bag? Imagine everyone with the knowledge of what the Fed purchased [and they really should know but consider the minutiae of such things over their head or too time consuming to noodle about]: would it be more or less likely to see mortgage defaults if this was widespread knowledge? In this era of entitlement and bail-out expectations, this is the kind of thing that the Fed wants to wait out and then sell the bag's contents once (or if) the housing market recovers and is on stable footing.
But let's face it, if you're a politician, you want a memorable program with strong anecdotal evidence and visual effects. This is getting a lot of hype, if nothing else.
Are your patients doing fine after the tonsils you unnecessarily ripped out of their throats to line your pockets? That's what Obama said, so it must be true.
“Cash for Clunkers”. Sounds like a game show.
Now, there's a way for people to watch Congress at work!
My guess is that most of those persons:
- were not driving “perfectly” working cars;
- were planning on buying a new car anyway;
- were already prepared for the financial “burden” of a car payment.
Whether or not they are “dumb” depends on their individual circumstances, and is not something you are knowledgeable enough to decide – unless you personally know all those 250,000 buyers.
FYI, some of us “dumb people” do not have a car payment after this purchase.
Which is why I said this earlier in this same chain of comments:
“Don't forget the fact that most people smart enough to use this subsidy are not the one the “plan” purported to help. Also, if a deadbeat actually used this “plan”, he is deeper in debt than he was before availing this “plan”
“
No, no, no the government shouldn't take your money (as a libertarian, I don't believe it is right for the government to TAKE your money), you should voluntarily give it to them and then provide a copy of the cleared check to prove to the rest of us at Cafe Hayek that you put your money where your mouth is.
No one here will dispute that the program will help the new automobile industry, but that is not the same as helping the economy as a whole. You could take $10 from each of us and give it to your friend to buy a new TV, of course that will help your friend and the TV retailer, but that does not mean the rest of us are better off.
Wow, my 1997 4Runner would bring 8k. You really were smart to buy that Ford!
The fed should have never bought this crap in the first place according to some experts. I really don't claim to know the answer. Some say we would have had a collapse worse then the great depression.
All I know is top bankers are taking home big bonuses again and the fed seems to have played the cards for them over the American people all these years.
I don't claim to have any answers but it is interesting that diverse people like Ron Paul, Dennis Kucinich and Bernie Sanders are on the same side of the issue.
Who was it that the plan purported to help? I thought the major goal was to help the car industry and the minor goal was to reduce the carbon footprint of 250,000 American drivers. Was there anything in the debate of this bill about helping deadbeats?
“The fed should have never bought this crap in the first place according to some experts.”
I agree. However the pain and chaos would have led to the same dipshits to feel the need to do something, anything to avoid the pain. The pain of course would have been more foreclosures (what percentage, no one knows); insurance-like contracts would have had to be honored or reneged on, which, either way would have put severe strains on the financing companies; and banks would have many foreclosed homes as assets.
One thing is for sure, minus any type of bailouts, the people that walked away from the mortage committments, would have had bad credit and would have found it tough to find a place to rent — much less live — with a glut of homes on the market. But you, muirgeo, would have probably felt sorry for these people and wanted congess to help them out.
The manufacturers (pre-bailout) were stupid – to get into the mess they were in to begin with. They should have not let the UAW undermine their business to the point of inviability.
Post-bailout, the manufacturers are now essentially government/union owned and run – so they are now even more stupid than the prior ownership.
The description in the WSJ of what was done to destroy the value of a clunker made me physically ill. Even if the vehicle as a whole may have little real value, the value of each individual part is much greater than the whole. Any the government has assured that all value is destroyed. Amazing.
“self interested” and “Rationally Self-Interested” are two separate things. Rationally self-interested people are not interested in violating the rights of others in their own self interest, because then there is nothing to stop others from doing that to them. Using unearned money extorted (even out-in-public- flag@whitehouse.gov political extortion still counts as extortion) from someone else is not in any rational person's self interest.
If there any left, I'm going to pick up a $500 car from the local used car dealership before I go to lease my new car. The $4500 will pay for a full year of lease payments.
Nice doing business with you taxpayers!
Official Department of Transportation stats as of 4:00 p.m. on Monday, August 3, 2009.
Dealer Registrations:
Number Submitted – 24,238
Number Approved – 20,495
Dealer Transactions:
Number Submitted – 133,767
Dollars Submitted – $563.8 million
Where did the rest of the money go?
As I understand it, Justin, the system for registering clunkers was so overwhelmed that even by Monday, many deals from last week had still not been entered. I know that my dealer tried all day long the first day to enter my deal and wasn't successful until late that evening.
Late last night was after they approved the extra $2 billion. So that doesn't mean much of anything. One thing we do know is that thanks to the “most transparent administration ever” the records will probably be sealed for 40 years.
We need another answer: D) Congress should have allocated 100 Billion in the first place. It would have been really cheap compared to the bonuses we are paying AIG, Goldman, BofA, Wells Fargo, etc, etc. And the money is actually getting spent rather than sitting in a portfolio somewhere.
*Absolutely. That's why a libertarian Fed Chairman sold out our country to libertarian bankers.
That seems to be a contradiction of terms. Calling any Fed Chairman a libertarian is like calling any absolute monarch a democratic statesman. The centralized monetary policy attempted by the fed is not a function of a free market. Likewise, the proposed national theft and corruption perpetrated by the banks is not necessarily a product of liberty.
Fuel efficient cars save oil and decrease emissions? Are you aware that increased fuel efficiency is not the same as decreased fuel consumption? In fact, increased fuel efficiency can lead to increased fuel consumption, especially with the help of a program like Cash for Clunkers.
I don't think people will really drive twice the miles/year with their new car vs their trade in, so yea there will be savings IMO.
Here is a preview of upcoming subsidies brought to you by the federal government:
<ul>
<li>Dollars for Dishwashers</li>
<li>Green for Groceries – also known as Dough for Dough</li>
<li>Benjamins for Bicycles – for the environmentalists out there.</li>
<li>Money for Motorcycles – that one is too unsafe. Ralph Nader would have a field day with this one</li>
<li>Cash for Cottages</li>
<li>Notes for nothing</li>
<li>Payments for Primary School – I might be allright with this one.</li>
</UL>
What rhymes with specie? Could not think of anything.
D. Go to a townhall meeting and ask your elected representative why he voted for the program, and will the plan be made permanent; or would the Bush tax cuts be made permanent instead?
I am vindicated!
http://online.wsj.com/article/SB124994366663220...
Fun Indeed,can I try…?
Fun Indeed,can I try…?
Fun Indeed,can I try…?
← Previous Comments
Comments on this entry are closed.