House Mulls Saving Broke Cash-for-Clunkers Program for...Two Weeks (Update: House Okays $2 Billion More)

The American people act on incentives. When the incentive is free wads of $4,500 for cars that would likely never qualify for such trade-in values on the free market, there will never be enough money to satisfy demand. That’s why the cash-for-clunkers program, meant to incentivize the trading in of gas-guzzlers for energy efficient cars, thereby boosting the flailing auto industry, has been suspended after less than a week. It was supposed to last until November, but lo and behold, when the government offers “free” money, the demand is high, indeed.

WASHINGTON – Four days after it launched, the popular cash-for-clunkers program has burned through its $950-million budget, sending the Obama administration scrambling to find additional money tonight and avoid a shutdown of the program. Advertisement Administration officials told Congress this evening that the plan would be suspended, triggering confusion and anger among thousands of dealers and car buyers across the country. Many dealers rushed to submit paperwork on pending trades, amid TV ads from automakers touting the program. But a White House official denied late today that the program was suspended, and said all valid deals would be honored. Officials at both ends of Pennsylvania Avenue were seeking ways to send additional money to the program; the U.S. House was set to adjourn Friday for a month-long break.

The House is trying to come to the rescue, with $2 billion in stimulus money. That’s great. It oughtta keep up with demand for approximately two weeks:

The House will consider $2 billion to fund the fuel efficiency program, which burned through its nearly $1 billion budget after only six days of availability to consumers. The House will vote on the bill as early as today, according to one House Republican Source. The funds will be drawn from re-directed stimulus funds, though it is not clear which programs will be targeted.

And, then we’ll presumably be on the hook for another couple billion after that. But what’s another couple billion? Taxpayers have already “invested” billions in the auto industry involuntarily, so why not an arbitrary redistribution of tax money from people who own cars above the 18-mpg “clunker” qualification to people who happen to own ’87 Chevy Blazers? I’ve known people with ’87 Blazers. They’re good people, and I for one am happy to subsidize their switch from glorious two-tone muddin’ machines to…Chevy Bolts. Many Obama-supporters on Twitter today have argued that the program is only a failure insomuch as it is a great success. You see, the Obama administration simply revealed the tremendous demand for
~~$4,500 hand-outs~~
fuel-efficient cars, and should be congratulated for that. The utter lack of competence, planning, or understanding of incentives is not an indication of the federal government’s unsuitability to mucking around in the private sector, but a reason to invite more mucking. You know what was also a great success, by that standard? The KFC grilled-chicken giveaway. The crowds of angry people, the insufficient chicken supply to honor Oprah-touted coupons, the frayed relations with customers, franchise-owners, media, and the stain on the company’s brand? Those were just syptoms of KFC’s revelation of the tremendous demand for its free chicken product, not the biggest, most high-profile marketing failure and bad business decision in years. Michael Barone notes that we’ve seen this program before:

How much will CfC ultimately cost? The sky may be the limit. The Almanac of American Politics 2002, of which I am co-author, describes a similar program in Arizona: “Her [Governor Jane Hull’s] biggest mistake was signing the alternative fuels program pushed by House Speaker Jeff Groscost. This provided huge subsidies, averaging over $20,000, to cars equipped to run on alternative fuels-propane, natural gas, electricity. The law did not require motorists to use the alternative fuels, and soon car owners were installing small propane tanks in their SUVs and demanding huge rebates. The program was billed as costing $5 million, but over the fall the cost zoomed up to $500 million-one-tenth of the state budget. Hull called a special session of the state legislature in November 2000 and suggested the state would pay the rebates over five years; Attorney General Janet Napolitano argued that the rebates could be voided if the law were repealed in the same year it was passed. Eventually the law was repealed in December 2000, but the cost to the state has been huge.”

Meanwhile, the unintended consequences are stacking up with a vengeance: Buy a Chevelle with your Cash-for-Clunkers money! Jack up prices for car maintenance on the likely lower-income and responsible folks who forgo the giveaway to keep an old car that doesn’t come with a monthly car payment:

If you own a “clunker,” you would be harmed by this legislation, because it would remove old cars, and old car parts, from the market, making older cars even more expensive to buy and to fix. Because the government plans to destroy the “clunkers” traded in — even if they are perfectly good vehicles — the supply of used cars will dwindle and both used — and new-car prices will increase.

Cost already-hurting car companies millions in ads planned and paid for touting the Cash-for-Clunkers program! But by all means, let’s have these folks revamp the 15 percent of the economy that is health care. I’m sure they’ll be able to keep us alive for more than a week. Update: The House hurriedly passed $2 billion more for the Cash-for-Clunkers program, which Obama proclaimed successful “well beyond all expectations.”

The vote was 316-109. The bill now goes to the Senate which remains in session for one more week. But they will have to pass the exact same bill since the House goes into recess today and will not be around to participate in a conference to hash out differences. President Obama praised Congress for their quick action and said he was “pleased with the progress” made in the House.

Republican Rep. Dave Camp had this to say on Twitter: “Cash for Clunkers was running on fumes, so we voted to top it off through September.” Sen. Claire McCaskill at first declared, via Twitter, her intention to vote “no” on a similar provision in the Senate, should it come up next week, as expected: “I will vote no on any extension of Cash for Clunkers program.” But later prevaricated: “I will consider using EXISTING stimulus $ that has already been appropriated to finish up cash for clunker program. No new $.” Sen. John McCain was more definitive in his opposition: “House passes $2b additional for “cash for clunkers” – another outrageous act of generational theft!”

House Mulls Saving Broke Cash-for-Clunkers Program for…Two Weeks (Update: House Okays $2 Billion More)

Tag:

NEWS

POLICY

COMMENTARY

RESTORING AMERICA