Quiz for Clunkheads

"A. Realize that $4500 per clunker was too big a subsidy and that you can achieve the same effects with a much smaller amount." -- Russ Roberts

This is just a nit-pick but clearly the idea of reducing the amount would be to not achieve the same effects.

If I understand your meaning perhaps a better wording would be, "A. Realize that $4500 per clunker was too big a subsidy and that you can achieve your goal with a much smaller amount."

As an aside, I'm just now noticing that this new blog commenting system doesn't support previews?

"Imagine you’re a member of Congress. You’re a fan of the Cash for Clunkers program."

I can't imagine that.

"A. Realize that $4500 per clunker was too big a subsidy and that you can achieve the same effects with a much smaller amount."

Such an excellent point. The clunkheads are overpaying for the clunkers and they can clearly buy the volume they want at a lower price.

How many reinactments of the broken window fallacy is congress permitted to fost on taxpayers.

I'd be curious to know how the used car market did during the same period in which we apparently had a surge in the new car market.

I'd also be curious to know how the high end consumer electronics market did during this same period.

I'm guessing it may have mirrored the German experience.

http://www.ft.com/cms/s/0/646018d0-23a4-11de-99...

D. Blame the other party. Increase that budget's line item 10-fold. Increase taxes to "pay" for the additional spending. Call for a special czar to be appointed to oversee this vitally important program...in fact, it's so important that you should call for it to be made permanent.

Russ Roberts: "Realize that $4500 per clunker was too big a subsidy and that you can achieve the same effects with a much smaller amount."

Had this been a private rather than public program, the manufacturers might have used test markets and focus groups to gain insights about optimal rebate size. The manufacturers would have done so before revealing the program to the nation. That's not an option available to Congress.

johndewey - If this were a private program, I (a non-car owner) wouldn't have to subsidize the owners of old cars who want to trade them in to buy new cars.

Oh, of course. Believe me, I am grateful for the $4,500 which you and the other taxpayers provided me last week. My 2001 Explorer Sport Trac was a little banged up, so its blue book trade-in value was only $2,500.

FYI, I've paid an awful lot of taxes over the 42 years I've earned income. So I don't feel guilty at all about getting a little of it back for a change.

42 years of taxes? Lord, I'm feeling old!

John Dewey,

Why should we expect you to deny yourself on principle when the government is handing out candy? Don't libertarians accept that man is self-interested? If my car qualified, I would do the same and I wouldn't feel guilty even if I weren't in the group that pays the overwhelming majority of taxes. I'm also proudly self-interested!

" Don't libertarians accept that man is self-interested? "



Absolutely. That's why a libertarian Fed Chairman sold out our country to libertarian bankers. And of course that's why libertarianism is a total failure and an impractical plan for us real world folks.


Only the dumb or unfortunate ones. The rest of us will find a way to extract rents from the government. You will bear the cost with a lower standard of living - no matter how hard you're willing to work.
Posted by: Methinks | Oct 13, 2008 11:25:33 PM

So, muirgeo, you found that vid so interesting that you posted a link to it here. The segment, the vid's poster, and especially the congress are so ignorant; I know what's in the 'bag' -- and it's not just some cutesy one-liner zing of an answer.

The question for you, Doctor, is "Take an educated guess: what's in the 'bag'?" Do you even know? And as messed up as it is, there's a strange reason why being honest about what's in the 'bag' has the potential to really cause problems. The insane part is that this scenario is actually helped by the wide-spread ignorance by many citizens of this country.

So, are you going to take a stab on what's in this 'bag', Doctor, or will you do the sensible thing -- not reveal your ignorance [this time] -- and just stick with Medicine?

What's in the bag as I understand it are a bunch of worthless securities.

And I understand that libertarian Ron Paul and far left Bernie Sanders agree we deserve to know what's in the bag.

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.

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.

"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.

Typical muirgeo strawman. The most libertarian player in that scenario is the one who demands that we look in the bag -- Ron Paul.

"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.

*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.

ha ha...I'm just upset that I couldn't use it myself. My 2002 elantra is getting old too...I had my heart set on a 2010 Mini with 37 mpg...but alas Government works against those with insight...my mpg was too high to qualify. I'm being punished because I had the insight to buy a fuel efficient car before it was "cool."

I'll let Prof. Roberts answer this one:

http://www.invisibleheart.com/Iheart/PolicySirl...

Sorry, alfredrick, but I don't think this 13 year old essay from Professor Roberts is applicable.

As I explained in my comment, I was already going to buy the same car I bought though just a few months later. The money I received from the government was already approved and allocated. It would have been received by someone, so it just as well be me.

As methinks points out, we need to act in our own self-interest.

Wow, my 1997 4Runner would bring 8k. You really were smart to buy that Ford!

"That's not an option available to Congress."

Of course it is, that's what they have committees for. In fact, according to <url=http://thomas.loc.gov/>Thomas</url>, in the House this bill spent time in both the Energy and Commerce committee and the Ways and Means committee. In the Senate it was referred to the Energy and Natural Resources committee. Certainly one of those could have tested the market for the optimal rebate size.

OT. Is there a link to a page somewhere which tells us which tags can be placed in comments?

To make a link, follow this model, not the one used for many php-enabled sites.

So it's straight up HTML, thanks. Now if only there were a preview I could have tested my above post before posting it.

What I meant was that a full test market rollout - where the true responses of consumers were tested through actual trade-ins - could not be done by Congress. The U.S. Congress cannot conduct "quiet" market tests the way that Proctor & Gamble or McDonalds or FedEx can.

There is quite likely some fraud on the fault of dealers and consumers, but I would be surprised if it were significant. The greatest fraud is the idea that this is an environmental bill, but the fact of the matter is that it is a handout for automakers and new car dealers. And after all the Chrysler dealers were dropped too. The environmental impact of producing and destroying/recycling cars is likely far worse than if the vehicle is simply run longer.

If picking the answer, I'd go with (A). Make the subsidy $100 for a car that does less than 20 mpg but improves current milage, $1000 for a car that gets 20-24 mpg, $2500 for a car that does 25-29 mpg, and $4500 for a car that does 30 mpg. Granted, the lower standards were likely just sent up to help GM, because the Civic and Corolla have superior reputations in the 30mpg overall market to at least their GM counterparts.

Steve - You beat me to it. C4C is a broken window fallacy.

It's a perfect example of law of unintended consequences and the ineptness of Government all rolled into one bill.

Partial list of unintended consequences:
1. The poor will be worse off since there will be fewer lower prices, perfectly usable cars on the market.
2. Short term boost in auto sales for dealerships, all this does is reduce inventory, by offering incentives to buy but does nothing about the long run outlook for the auto manufacturing companies. The underlining problem is why there was so much pent up inventory? That's something government fiat cannot fix.
3. From number 1, we will see a "crisis" in "affordable" cars for the poor, looks for another government program to help elevate that, which will cost even more tax dollars.
4. From number 2, the auto companies will see this short term boost as a sign of consumer confidence and long term expectations. They will boost production, but quantity demanded hasn't changed. If anything quantity demanded will go down in the long run because of this program. The Auto companies will loose money in the long run because of C4C and will require government intervention, which thanks to all those campaign donations, they'll receive able tax money to pay for their foolish investments.

This is a layperson view with an Austrian twist. I am no economist and haven't even finish Intro to Macro yet...which probably is the reason why I see this so clearly. My head isn't filled with Keynesian mumbo jumbo yet so my ability to reason hasn't been dulled.

This is just another piece of evidence as to why Keynesianism is a worthless theory and needs to be scrapped. I'm convinced if and when we get out of this mess, in 2 hundred years when they look back at the 20th century, the top 5 most "evil" people from the 20th will be; Hilter, Stalin, Pol Pot, Mao, and Lord Keynes.

I disagree with number 4. That assumes that manufacturers are stupid. Certainly, they know where the sales boost came from, they read the same papers you do. Besides, they almost certainly lobbied for the bill, their bean counters must be as we speak calculating the return on investment for that lobbying.

Well you would have thought that after the Dot Com boom and crash, they would learn what a bubble looks like as well...

When the prices get distorted, the information gets distorted. The car manufactures don't have an accurate set of data to determine what kind of cars to build...since it's entirely plausible that some people bought cars that they never would have thanks to $4500 from you and me, and an extra incentives from the Car industry. So no matter what, they will makes some bad investments, it all comes to how wrong they are and how bad those investments are.

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.

I am vindicated!
http://online.wsj.com/article/SB124994366663220...

$36 of my dollars to get 1 million more fuel efficient cars that save oil, clean the air, decrease emissions, stimulates the economy... wildly successful.

Much better deal then the $16,000 I paid to procure Iraqi oil.

Yeah definitely C. A & B deserve some attention as well.

Methinks, John dewey, zombiehero, et.al,

Here is the exact reason why no one should be participating in what is just another socialist pie in the sky scam that buys votes and support today and passes on the cost to our children's children.

You see muirduck approves and calls it wildly successful, I expect this from him, but not from you that I know are intelligent enough to know that participation creates the illusion of a successful government program. The illusion.

So, in the end libertarians and the folk of this blog really are sell-outs and morality and principle doesn't matter? I find it hard to believe, yet there it is.

It is for this reason that I am extremely skeptical when I hear or read good 'ole redblooded muricans saying, "By God they'll get my gun when they pry it from my cold dead fingers."

The free lunch always seems to win in the end with the majority of humans.

Muirdog needs scapegoats and an endless string of non sequiturs to get through the day. I fear for his patients.

My patients are doing fine. I fear for people effected by Wall Streeters who set up ponzi schemes. Of course you're not willing to specifically disclose what you do.

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.

It's always a good convo until Muirduck comes in...sigh

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.

What if all those drivers of new fuel efficient cars actually burn more gasoline because their cost per mile just went down? There are many examples of efficiency improvements actual resulting in greater total consumption of a resource.

As for the stimulation of the economy, are you saying the government is spending your $36 more wisely than you could? Perhaps you should send them all your money, imagine how much better off the economy would be then.

People will probably drive their new cars more now that it cost them less. And where will they drive it? To the movies, to dinner, to the furniture store to buy those things they couldn't afford before. There is however NO evidence that they will use the same or more gas as before.


Absolutely.... in this case the government is likely spending my $36 dollars and getting far more value for it then I could. So sure take another $72. For me just the mere fact that a government program is working so well and causing holy water on vampire effects on market undead fundamentalist is worth it right there.

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.

While, I cant say with certainty the cause and effect, here are some interesting numbers I found. According to the EIA, the total vehicle-miles traveled increased from 1,215 billion in 1983 to 2,287 billion in 2001, an increase of 88.2%. During that time, the U.S. population only increased 20.4%. So, the average person traveled 56% more miles. In that same time frame, the fuel economy increased from 15.1 mpg to 20.2 mpg, an increase of 33.8%. Again, I cannot say with certainty the cause and effect, but from 1983 to 2001 the average person traveled 56% further while fuel economy only improved 33.8%, meaning that average person used more fuel even with improved efficiency.

Data taken from: http://www.eia.doe.gov/emeu/rtecs/archive/arch_...

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.

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.

What happens to all the "clunkers"?

It gets shipped to China and then shipped back as some other doodad. Helping clean the air, saving fuel, and decreasing emissions while being destroyed, on it's way to china, it's stay in China, and on it's way back. All at the same, perfectly functioning wealth ( automobile ) is destroyed - I hear shattering windows.

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"

The program is about cleaning the air to combat global warming, that is the so-called main impetus to this clunker program, reduce carbon emissions.

I suspect though that those who are participating in the program are unwittingly helping the socialist and the envirowhackos to advance their claim that the majority support the movements to "do something about the environment and your purchases will be proof in the media that you supported the "fix global warming crowd". In other words those who participated have just given a boost to Al Gore and his gorites.

It's a typical Bootlegger and Baptist type of bill. The "Greenies" think they are helping the planet and the car industry gets a short run boost. What's win-win for them, will be lose-lose for everyone else.

As vikingvista pointed out a few hours ago, the vehicles are rendered undriveable:

1. Upon receiving a clunker as trade-in, the dealer is required to replace the engine oil with sodium silicate solution, then run the engine until it stops and will not restart. Apparently sodium silicate renders the engine block inoperable.

2. The dealer then transfers the vehicle to a salvage auction, where it is purchased by a government-certified disposal facility.

3. The disposal facility may remove and sell any parts from the vehicle except the engine block and drive train.

4. The disposal facility then crushes or shreds whatever is not removed for sale.

The details of the program are explained in detail at the link above. To some it may seem a boring 136 page read, but I was fascinated by the level of detail the government bureaucrats thought necessary. I cannot imagine how many pages will be required for the Obamacrats to "reform" the health care industry.

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.

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"
"

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 pricing is a typical government approach - either your car qualifies as a clunker, or it doesn't.

A more disciplined approach: Pay ANY customer $xxx per 1 mpg increase, regardless of the age of the car or its mileage. Then instead of scrapping the "clunker", export it to a country that pays well for older cars.

OR, convert it to run on compressed natural gas (a very clean and cheap fuel) then resell it in the US. To scrap perfectly usable cars, regardless of age, is something only a Washington bureaucrat could dream up.

I assume the goal of the program is to get these vehicles off the road. What's the over/under on when these vehicles start appearing back on the road?

The government orders the engines immediately destroyed.

What a disgraceful destruction of wealth. But at least the price is right.

All of you miss the point. It should not matter to you whether the program will work, what tweaks it needs, who it helps, how many "windows it breaks." That's just the haze that is used to enshroud the fact that this program - like every state-run program in existence - is based on force. If you would anthropomorphize the state you would see it smiling at your silly bickering. What does the state care if liberals use it to bash conservatives over the head, or vise versa. The state is there to bash people over the head (both metaphorically and in reality), and it doesn't care who "controls" it.

I know you don't like hearing it, but the only thing the state fears is anarchism. Anarchism is the death knell of the violence perpetrated by the state, and it will do anything - or say anything - to avoid that end. Until you recognize that anarchism is the only way to bring an end to all this madness the madness will continue. Arguing over what the policy should be is a waste of our time.

So, let me get this straight. 1,000,000,000 divided by 4500 equals 222,222 people helped by this program. Never mind all the attendant idiocy of the measure, is this at all a good return on investment? 1000 million dollars to help less than a quarter of a million people? WTF?!

You can't put a price on the environment.

LOL

Actually it doesn't even "help" 222,222 people. Only 23,000 cars have qualified, and I read somewhere that 64,000 are waiting to be approved. So that means a total of 87,000 and I'll be generous here say 100,000 will be qualified for what was meant for roughly 250,000. Any private firm would go bankrupt under those conditions....then again they can't force your money from you like the Government can.

I think those figures are a few days old. Last week the DOT had no idea how many deals were awaiting approval. That's because either their database or their servers could not process all the requested transactions.

As the Associated Press reported yesterday:

"The lawmakers said administration officials told them that 120,000 new vehicle sales had been processed through the program and an additional 100,000 to 130,000 were expected to be processed to reach the $1 billion in funding."

According to the AP, 80% of the trade-ins were either SUV's or pickups. For the deals processed so far, the average mileage increase from clunker to new vehicle was 9.6 mpg.

Is this cash for clunkers, or cash for votes?

There's Green Peace and then there's Green Appease.

Although proponents of the program are already commenting on how successful it was, it will be months before we can tell if the program achieved any real "success" other than the redistribution of wealth. Many, many people put off car purchases they were going to make anyway and I suspect that a similarly large number of people moved up their purchases to coincide with the incentive. We should look at the program next year to see what effects it really had. Of course, that's far too long for Washington to wait.

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.

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.

"Cash for Clunkers". Sounds like a game show.

Now, there's a way for people to watch Congress at work!

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.

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.

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?

Fun Indeed,can I try…?