How Cash-for-Clunkers Should Have Worked

We tax all the others and pass the revenue on to you

The Cash-for-Clunkers program, scheduled to run until Nov. 1, will end for the second time on August 24. The administration spins it as wildly successful, more objective observers, not so much. It was a simple concept. If your trade-in qualified, you got a government subsidy of $3,500-$4,500 on the purchase of a qualifying new car.


Why did this program exist? You can download the bill, 13 USC 1301 et seq, HERE. It's all about getting you out of a low-mpg car into a higher-mpg car, thereby taking a major step in freeing us from dependence on foreign oil. That's it, that's what C-f-C was for. That's all it was for.


What about less pollution, safer cars and stimulating the auto industry or the economy in general? Nope, not a thing. At best those are intended ancillary benefits. Guesstimated reductions in greenhouse gases are supposed to be included in a wind-up report. Good luck with that SWAG. It's a sop to the greens, nothing more.


Most people would agree that better mpg is a desirable goal. So is less pollution and we're told the economy badly needs stimulation. The logical fallacy lies in tying those goals to the mandatory purchase of a new car. For instance, wouldn't we be less reliant on foreign oil if, after you handed over your clunker, you didn't replace it at all? The same for reducing pollution. As for the economy, stay with me. There was a better way.


What if, all requirements remaining the same, you brought your clunker in to your local dealer and he paid you a reimbursable $4,000 that you could keep and do with as you please? The gummint pays the dealer $500 more for doing the paperwork, disabling the clunker and towing it to the scrap yard. The scrap metal guy gets the clunker for free or maybe he gets $100 but he has to destroy it and not vulture the parts.


What would change? First, you get $4k to spend any way you want. The car dealer gets first crack at you, though, because you have to deal with him to get the payment. If he can sell you a car then more power to him and I hope you enjoy your future clunker. The gummint achieves its stated goal of better mileage from the car you drive.


What if you don't buy a new car at all? From the standpoint of achieving the gummint's goals, that's even better. Using zero gallons of gas is better than 12 mpg, right? The gummint over-achieves its stated goals and you start taking alternate transportation. Win-win. Sure, a few people might buy down, picking up an older-than-25-years vehicle, but not many. Really, how badly do you want to put your family in a $500 '74 Pinto or Caddy or Datsun, even if you get to pocket a cool $3,500? And if you do, why would we object to that? The car was too old to qualify and it changed hands. So what? There might be a little leakage here, but not much.


If you don't buy a replacement vehicle then the entire economy is yours to choose from to spend your $4k. Pay your debts, stimulate the credit and retail industries and improve your cash flow. Put it into a down payment on a house, stimulate the housing industry. Buy some securities for your retirement, stimulate the investment industry. Save it for the next rainy day, stimulate the banking and S&L industry. The list is endless.


What about the auto industry? Remember, they get first crack at you. Marketing geniuses that they are, if they can't convince you to buy a new car with a leg up like that, then maybe you really don't need that new car. At the very worst they have a new high-margin revenue stream of processing clunkers. If the auto industry isn't stimulated by your $4k then other industries surely will be. Christmas sales, right around the corner now, might pick up far beyond the current dismal expectations, resulting in more jobs and the retail multiplier effect.


How can we be sure this will work the way I say it will? Because we have an example to guide us. Remember the stimulus plan from earlier this year, the one that gave you $400 for nothing? We were told it was a magnificent success at stimulating the entire economy. Let's believe that.


If $400 for nothing was good then how can $4,000 for something very real and beneficial not be better? Consider the removal of low-mpg, high-pollution vehicles from our roads and all of a suddenly there's no downside. There's the cost, of course, but that money was already allocated. The question then was how best to spend it. What did you get from C-f-C? Nothing, I bet, unless you bought a qualifying new car. That was just one of the drawbacks of C-f-C. There wasn't something for everyone.


There's only one scenario in which this idea doesn't make sense and it is this: The purpose of C-f-C was never the purpose that was written into law. It was only to funnel $3 bil more into the auto industry in the guise of an energy bill. It was never meant to substantially reduce mpg -- and our aging auto fleet will do that for us anyway, without any incentives -- and its ancillary benefits are merely fortuitous. In this hypothetical scenario C-f-C was a sham, borrowing near-term future car sales and shifting a portion of the economic crisis from the industries that created it to non-critical-thinking buyers who will be burdened by greatly increased consumer debt with little of lasting value to show for it.


I leave it to you. Was there a better way to run C-f-C and still achieve its stated and ancillary goals and more? I think there was. I even think that Congress might have stumbled on it if the "emergency" measures which are being forced on us had been calmly debated in Congressional hearings. After all, that's their job, not just to vote according to orders from their leadership.


You remember Congressional hearings, don't you? Where individual congress members had to debate and defend proposed legislation? In those days, town hall meetings actually mattered. Our reps could hear our voices and vote accordingly. Congressional hearings have been replaced by repeated cries of "Fire! Fire!" and we're told to grab any bucket or new law and throw it on the flames, and do it now.


No, now is the time for reflection and debate. Take the time to find better ways.


Suppose you were an idiot; and suppose you were a member of Congress. But I repeat myself. -- Mark Twain

Speak softly, listen loudly

We tax all the others and pass the revenue on to you

In my July 7 half-year retrospective column, in the "jury's still out" section, I recalled my May 19 prediction, to wit: Just as we're going to get mileage taxes plus gas taxes to make up for better fuel economies, we'll surely hear a push to tax pot, and is it such a leap to then tax all forms of now-illegal products? (May 19).


Sure enough, CNN reported on July 22 "Oakland, California, passes landmark marijuana tax". Jury isn't out any more.


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Busing, 2009. Some of our elected reps are busing loads of supporters to their town hall meetings (and who's paying for that?) and waiving the first-come, first-served rules they apply to people who just show up according to the announcements. That creates the image of support where little real support exists. The prez is doing it and having little girls shill as random attendees as well. Others among our reps are doing it, too. Few reliable reports from the loyal opposition, but that doesn't mean it ain't happening. C'mon prez and any other bozos doing this, isn't that beneath you?


This just in: Busing is supposed to correct inequalities between equally qualified groups who have suffered discrimination, not create inequalities between equally qualified groups with different opinions who have not.


This is the political equivalent of busing in out-of-town police to put down Dr. King's march across Selma Bridge on Bloody Sunday in 1965. It is the complete abandonment of dialog in favor of the politics of brute strength in upholding an entrenched establishment. No police dogs... yet. "Ax Handle" Maddox would feel right at home. Feels more than a little bit like ballot box stuffing, too.


Note to pols: Speak softly, listen loudly, give your constituents as much of your time as they need. There is no need to restrict your meetings to an hour. If your ideas have merit you will prevail. If they don't, you have to go. That's essentially the premise they all initially ran on anyway, isn't it? Time to apply it.


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Did you see Hilary bristle when someone asked her what her husband would do? Something about not being able to channel Bill. But Bill went to North Korea and saved two of Al Gore's employees from certain death in a forced labor camp. Gotta give it up for that. Nice job. But why Bill? More gravitas than our SecState? Obama was too busy? Hilary was, what, doing something more important? No one is minding the American foreign policy store and the neighborhood kids are vandalizing it.


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You cannot bring about prosperity by discouraging thrift. You cannot help small men by tearing down big men. You cannot strengthen the weak by weakening the strong. You cannot lift the wage-earner by tearing down the wage-payer. You cannot help the poor man by destroying the rich. You cannot keep people out of trouble by spending more than your income. You cannot further the brotherhood of man by inciting class hatred. You cannot establish security on borrowed money. You cannot build character and courage by taking away men's initiative and independence. You cannot help men permanently by doing for them what they could and should do for themselves. -- William Boetcker

Come On In -- An Invitation

We tax all the others and pass the revenue on to you

Got something on your mind and want to see it in cyber-print? You are invited to submit an entire column (that's what I still call these blog posts) or just a paragraph or two. I prefer that it be emailed to me so I can devote main blog space to you but you can also submit it in the form of a comment.


I got this idea from Dr. Russ Burgos at UCLA. When I objected (perhaps overly rudely, I might add) to some things he said in his blog Splunge! (if you want to find my several posts search the blog for Chuck S or just click the link) he invited me to do what I am inviting you to do. Prof B and I don't agree on much. I'm a neocon to him and he's, well, at least he was polite enough to allow me my say.


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Count Switzerland in the group of tax havens that have new disclosure agreements with the IRS., as early as next week. If you have big bucks hidden in a Swiss bank account and don't move it by say, this afternoon, you might be in for a big bite of IRS-style justice. Of course, your records will still be there and be shared but your money could be in, say Dubai. Just sayin'. I don't admire MSNBC but this is a pretty good overview.


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As long as you asked.

My darlin' youngest daughter, a TV news producer, writes:


hi pops,

so dad, i know you're a republican and everything, but i also know that you're not a lunatic. so could you weigh in a little bit on these crazy town hall meetings about health care reform that are practically devolving into riots? what kind of a discussion can be had if people are acting like disgruntled toddlers?

i want to hear a debate, no question, even though i am for reform. but this seems wacky. it's about something else, i just can't figure out what. is it racial? is it party-driven?

enlighten me. please. you're the only republican i trust.




To which I replied:

Good Morning My Dear Youngest Daughter

Thank you for the question. I have been following this issue.

If I understand the format of town hall meetings it is as follows: An elected representative takes a position on an issue. S/he makes it known by public statements and voting record. "Town hall meetings" (THMs) have devolved (I like that word) to a sales pitch for said positions. They originally were meant for an elected official to hear the views of constituents and then to vote according to their wishes as s/he understood them from the meetings. Keep in the forefront of your mind that this is the way a representative democracy is supposed to work. We vote them in, tell them what we want and they vote our wishes within the boundaries of their own consciences, national policy and our Constitution, as ever was. If they don't, we vote them out the next time around and pick someone who will.

"i want to hear a debate" THMs were never intended as a debate forum and they are not now such a forum. It would be peculiar indeed for a constituency to elect a representative, then enter into debate with said rep. I can't recall ever hearing of an ad hoc debate between an elected representative and anyone else and I don't expect one now. Neither should you.

As you know, the administration failed in its initial attempt to re-structure/reform American health care, promising a resolution by the August congressional recess but unable to deliver. The majority leadership in both houses decided that "town hall meetings" (with few if any actual town halls involved) would be an effective way to quiet opposition and sell the plan before they re-convene in September, when they envisioned claiming to vote according to a ground-swell of support and demand from their constituents. They seem to have forgotten, inter alia, that almost none of them are effective public speakers. That has hurt them.

The administration wants either health care reform or health insurance reform. They can't make up their minds and we see Ms. Pelosi (for instance) and others demonizing the very health insurance and health care industries they are concurrently working with. The administration has been unable to explain and justify its plan in terms of coverage, cost, benefit, changes and constitutionality. Now elected representatives from Harry Reid (but not Nancy Pelosi, yet) are back in the hustings trying to sell the current plan that was, BTW, rejected a couple of weeks ago by them. They're not doing a good job.

The reps open their THMs by reading a prepared statement for the record (and one wonders why they don't speak extemporaneously), then allow time for attendees to speak. What the media (you, for instance) has been showing are vocal objections from presumed constituents (they have been pretty carefully screened for that and asked in advance what they want to say) who are mostly in opposition to the health care plan as currently envisioned by the administration and supported by the rep of the moment.

The THM plan has backfired, as you have seen with the angry objections to the sales pitches of some of the reps. "Eggs on their faces" comes to mind. It is the right and expectation of constituents that their reps will vote as I outlined. Voting Democrat or Republican is not a rubber stamp for every Democratic or Republican measure that is floated or submitted to Congress. People want to be heard on critical issues. Thus, THMs.

"Is it racial?" No.

"Is it party-driven?" To some extent, yes. The THMs on this issue are almost (but not quite) exclusively being held by Democrats, who have done a poor job of it. I have seen no anti-reform THMs from either side of the aisle. Reform opposition is encouraged by some conservative elements, no doubt about it, but that isn't necessarily party-driven even though it may be ideologically driven. However, it would be terribly mis-informed to think that all those vocal constituents do not believe what they are saying or have a right to say it, even within the tightly controlled confines of a THM. As you may have noticed, many reps who have yet to hold a THM are now declining to do so, even after they committed to them. Others simply refuse to meet in the open at all. As I wrote, that isn't the way representative democracy is supposed to work. Another thing to notice is the lack of popular support for the administration's/rep's position on reform. Where are the "pro" people? They have an equal right and invitation to appear and speak. Let them. I'll listen.

"what kind of a discussion can be had if people are acting like disgruntled toddlers?" It's not supposed to be a discussion as we might generally think of discussions, as you may have gleaned already.

"Disgruntled toddlers"? I suppose that depends on whose ox is being gored. Such characterizations may serve the intent of the speaker or writer but are the factual or do they only further an "us" versus "them" approach?

"you're the only republican i trust." I'm sorry to hear that. There are many trustworthy Republicans and Democrats. For instance, I trust my representative Peter DeFazio, a Democrat. If health care reform was only an issue of party loyalty then it would already have been decided along party lines. It's not. It's an issue that will fundamentally change 1/6 of our economy and people want to know why and how and whether their reps read the bill before they voted on it. This one issue will change Lucy's life and she will bear the cost, along with her children. Isn't it fair that people want to know why and how and how much will it cost?

Thanks for asking. Keep an open mind and read my blog.

Love, Daddy

Cash-From-Idiots

We tax all the others and pass the revenue on to you

Cash for clunkers has come a-cropper. Let me summarize:


1. The gummint takes over two of our three major car companies, paying wildly more than they are worth because "they're too big to fail" and, um, that's what the UAW wants.


2. Gummint can't move their cars any better than the old owners did but they have an ace up their sleeves.


3. Gummint can give away taxpayer money to people who will please please please buy a new car. The people who get the money, in the form of a cash-for-clunkers payment for their undesirable trade-ins, are mostly the same people who would have bought without an inducement. Sales are front-loaded into the current period, the equivalent of borrowing new car sales from the near-term future.


4. As a consequence, post c-f-c sales will be dismal and jobs will be lost. The economic crisis will further shift to consumers, other new purchases will have to be abandoned or postponed because of the new car debt. Expect holiday sales to be way down. Look for 10% unemployment by the end of the year.


C-f-c was supposed to last for a little more than three months. It lasted four days before the gummint had to beg another $2 bil. Not close, no cigar, the folks who set this up didn't have a clue about selling cars OR giving rebates. Pretty predictable, given that the car czar, like the chairman of GM, knows nothing about any aspect of the car business nor, apparently, about any other business.


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Nine banks that lost a total of $81 bil last year have paid out $32.6 bil in employee bonuses. More than 4,800 employees received bonuses in excess of a mil each. Citigroup and Merrill Lynch lost more than $54 bil, received more than $55 bil in TARP handouts and paid out $8.9 bil in bonuses. Bozo bonuses, we called them earlier, paid from your money to the people who in large part caused the economic crisis. How much was your bonus? (Thank you, Washington Post.)


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Meanwhile, governments increasingly desperate for revenue turn to the least able among us to fund its programs. WSJ tells us of the new 400,000 sq ft casino in Pittsburgh, 3,000 slots (3,000!) and several bars and restaurants. All this when there are four other major casinos within a 2-hour drive. Sin taxes ("lifestyle choice taxes") are where the revenue is thought to be. Could be, but it's not inexhaustible. So drink, gamble, smoke to your heart's content, just as long as gummint gets the share that used to belong to Uncle Vito. Call it cash-from-idiots. Here's something you can safely bet on: Pennsylvania will increasing rely on this revenue stream. Then, when it peters out, they'll ask you for a bailout. Hey, it was fun while it lasted.


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Here's another prediction: GM is failing. Maybe one, maybe two more rescues is about all we can handle. Then gummint will discover what you already know, that if you're not competitive you don't belong in the market. Hear your money being flushed down the toilet, do you? Not, of course, before your various czars and their staffs are handsomely compensated. Think Citibank and Merrill Lynch.


BTW... remember when Fiat was supposed to be the savior of the American car industry (something like three months ago), taking over GM (but not actually paying anything, f''hevvin's sake) and all that? What happened to that pipe dream? Where is their contribution?


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Health care needs to overhauled. Few disagree. Consider TARP, the auto industry, bozo bonuses. bank bailouts to tax debtor corporations and $3 tril in new deficit spending with 9,000 pork projects in the current budget. Do you really want gummint in control of health care? Really?


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When the czar has a cold, all Russia coughs -- Russian proverb