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Cash for Clunkers Cluelessness

I received this in an email and found some food for thought. I think others may too.

BODY OF EMAIL TEXT

The numbers I checked out are okay except I can’t verify the $1 Billion to run the program. I suspect that is way off base. There was an article that said there were 3 agencies involved in the program but the government does not specify if these were existing employees or new hires or a combination of both but that 79 employees were brought in to assist in the program. If only 80 employees were involved I estimated their wages at $91,000 annually (with 30% fringe benefits) or $45,500 for six months for a total cost $3.6 million. If you throw congress and their staff into the equation you are talking, for three months, about $27 million.


Sorry about the lengthy follow up. I just wanted to be sure I was comfortable with the numbers.

What is clear is we are throwing money at a problem without reasonable numbers to determine the game plan results.

A good example of how our Federal Government uses your tax dollars to fund one of their money/earth saving programs and then announces how successful it was!!!!


· A vehicle at 15 mpg and 12,000 miles per year uses 800 gallons a year of gasoline.

· A vehicle at 25 mpg and 12,000 miles per year uses 480 gallons a year.

· So, the average clunker transaction will reduce US gasoline consumption by 320 gallons a year.

· They claim 700,000 vehicles – so that’s 224 million gallons a year.

· That equates to a bit over 5 million barrels of oil.

· 5 million barrels of oil is about ¼ of one day’s US oil consumption.

· And, 5 million barrels of oil costs about $375 million dollars at $75/bbl.

· So, we all contributed to spending $3 billion to save $350 million.

. I billion of the package was for the Dept. of Transportation to administer the program.

. You don’t need to provide citizenship information, SS# etc. to qualify and Canadians and Mexicans can cross the border to cash in.

Edmonds (a highly thought of on line auto retailer, auto comparison web site.

Edmunds.com estimates that the average cost to the taxpayer will be about $20,000 per vehicle.


If all buyers have qualified for the higher $4,500 rebate, the “cash for clunkers” program will mean a marginal increase in car sales of 22,000 this quarter. $1 billion divided by 22,000 means a net cost to the government of $45,354 per car. (This is a cost estimate for the first $1 billion and does not consider the additional $2 billion.)

. Some clunker deals are being rejected by the government because they don’t meet all of the program’s specifications. For example, the trade-in must have been continuously insured for the 12 months prior to the clunkers transaction.

Car & Driver

. if you’re trading in a car that’s worth $3000, your net gain is only $500. Although if your car is worth $100, CFC couldn’t come at a better time.

people driving cheap old beaters are probably doing so because they can’t afford a new car. And $3500 doesn’t go far when the average transaction price of new cars hovers around $24K. The vouchers don’t apply toward the purchase of used cars, for which the majority of old beaters are traded in.

However, we hope these legislators don’t expect it to meaningfully help the domestic automakers. Many of the automobiles with fuel-economy ratings high enough to qualify for the vouchers come from Japan and Korea


Washington Post

Cash for clunkers’ effect on pollution? A blip (The article has been pulled from the post. This was the the title of the article.)


Wall Street Journal-Auto Repair Association comments.

The automotive after-market, a $250 billion industry that employs about 4.6 million people, could be among the biggest losers in the clunkers program, said Kathleen Schmatz, head of the Automotive After-market Industry Association: “It’s everybody from the Fortune 500 parts manufacturer all the way through the supply chain to the independent repair shop.

On the other hand, this is crackpot economics. The subsidy won’t add to net national wealth, since it merely transfers money to one taxpayer’s pocket from someone else’s, and merely pays that taxpayer to destroy a perfectly serviceable asset in return for something he might have bought anyway. By this logic, everyone should burn the sofa and dining room set and refurnish the homestead every couple of years.


U.S. News and World Report

Cash for Clunkers may have cut our oil consumption by less than 0.2 percent per year. It didn’t even save us a day’s worth of gas. (The numbers in this report are a little different

than the numbers I received in red above but are very close).

What’s more, some analysts wonder if Cash for Clunkers really created any new sales at all. It’s possible that the program simply caused some people to buy cars earlier than they otherwise would have. What good comes from adding to August sales if we subtract from future sales to do it?

Even if it brought in new buyers, that scenario might create its own economic problems. The program led hundreds of thousands of Americans, for instance, to take on new debt in the midst of a recession and an uncertain job market.

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