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Friday, July 31, 2009

Cash for Clunkers

What an awful joke. Talk about short-sighted wastefulness.

Their two rationales were to 1) stimulate new auto sales and 2) get old, inefficient cars off the road and replaced with newer more efficient ones.

The first rationale is an interesting answer to public backlash over bailouts. It makes it look like the government is handing out money to the people, rather than straight to the car companies. Never mind that once you've got your $4.5K from the government, you're on the hook to pay for the rest of the car. So really, you've just been encouraged to subsidize car companies from your wallet, rather than your income tax. And please ignore the fact that the government'll be needing that $4.5k back at some point, since they had to borrow it from the ever-generous developing world and eventually the loans will come due. There's a reason Bernie Madoff is in prison; we should hold our politicians to the same standard of accountability.

The second rationale looks pretty sound on the surface, but remember that it takes energy and resources to build a new car, and any remaining use you could have extracted from the clunker (maybe by doing regular maintenance on it) is wasted. In other words: when you consider the whole life cycle of a vehicle, it's less efficient to buy a new one with good gas mileage than an old one with poor mileage. One might object that they could save more money on gas than the price difference between the new and the old car... but the math doesn't tend to work out in that person's favor, given the outstanding rate of depreciation on new cars. I imagine that the existing capital stock of vehicles could be maintained indefinitely, adding new ones only to satisfy growing numbers of drivers in the market (like we do with airplanes), but at some point we as a society decided that we'd rather throw our great masses of steel, glass, and rubber away every five years and have new ones made for ourselves. And the auto companies happily complied, producing vehicles that matched our expectancies in terms of lifespan.

It didn't have to be that way. Again, look at the aviation market. Planes are much more complex machines, and they stay in service for much much longer. I imagine that has a lot to do with lawfully required maintenance programs. What if it regular preventative maintenance on parts that are known to wear out after so many uses was required for cars, just like it is for airplanes? Oh, and what if instead of letting the government do that, we privatized all the roads, and let the owners decide what standards they want to require from their clients? Set up software that schedules and tracks the maintenance of each vehicle and a system of trust certificates that can be used for verification. You're maintenance bill would be higher, but your new-car-every-five-years bill would be zero. Plus the roads would be safer.

Not likely to get implemented any time soon.

That the program is being axed because it spent its entire budget in one week is ironic icing on the cake of centrally-planed ineptitude.

Update: well, I guess congress extended its funding by another $2,000,000,000 ($2B). True; that's a drop in the bucket next to the $1,000,000,000,000 ($1,000B+) we've spent in other bailouts, but if the program maintains its popularity, they'll have to keep re-authorizing that amount every two weeks. Fifty Two Billion is bigger than the bailout we gave to GM.

2 comments:

Matthew J Peterson said...

This issue, while interesting, is, as you say, a drop in the bucket compared to the changes that would occur through retooling auto factories, research and development, and the private and public reorganization of health care that is imminent. (All of which pales in comparison, still, to the bank bailouts)

Cash for clunkers is, as my brother points out, a very popular program. The program doesn't make sense to me, because it seems unfair to subsidize individuals who happen to be in the position to buy cars (which in effect subsidizes the auto companies). But it is another way to bail out the auto industry, to get the economy moving more favorably, rationally or not. Also, your guess on 52 billion is just a guess. Let's see how big it gets, then we'll know.

It's dumb, but brings optimism to people, and it's a drop in the bucket (just think of the 70 billion voted for over and over again for the Iraq war. And again, the enormous bank bailout. This clunkers thing is 2 billion).

TJ Murphy said...

Matt,

The program's popularity is one reason that I think its worth being concerned about. This is a concrete example of the hand of "rationally engineered economy" reaching down directly to the individual level to execute what it judges to be the best course of action. Presently, the hand is holding a carrot, and so individuals welcome it. How sure can we be that next time, it won't be a holding a stick?

Perhaps another reason I feel that its worthy of attention and ire is precisely because it is a relatively small thing compared to the bank bailouts and the Iraq war. the numbers attached to those disasters defy comprehension, and the issues involved are dazzlingly complex. But you and I and everyone else who's judgement isn't clouded by being a direct beneficiary of the program can recognize the folly of spending money to destroy resources.

Or, if one wanted to take a more general, macro-level view of the problem, one might be justifiably concerned by the prospect of increasing the national debt to encourage individuals to increase their personal debt to buy assets that are becoming obviated by the transformation of our economy with the stated goal of preserving an industry that has refused to adapt to changing conditions. I think that our willingness to take that course demonstrates deep cultural problems: we'd rather destroy than fix, we'd rather stagnate than adapt and change.