Cash for Clunkers Suspended?

Print Friendly

101_0155

The Cash for Clunkers program  has been active for just over a week.  The Cash for Clunkers program has been so successful that lawmakers are now doubtful about its ability to continue.  Will the program be suspended?  The initial intention of the program was to motivate vehicle owners to upgrade to more fuel efficient newer model vehicles.  The CARS (Car Allowance Rebate System) offers a $3,500 – $4,500 rebate to those who exchanged a vehicle with 18 miles per gallon or less for a more fuel efficient new automobile.

The News:

The following Chicago Tribune article was posted late Thursday night:

The government’s cash for clunkers program has burned through its $1 billion budget in less than a week as car buyers swarmed dealerships, and federal officials are scrambling to find more money to keep it going, according to government sources.

….

“We are working tonight to assess the situation facing what is obviously an incredibly popular program,” the White House said late Thursday. “Auto dealers and consumers should have confidence that all valid CARS transactions that have taken place to date will be honored.”

So far the program has paid about $150 million to car dealers and reserved as much as $850 million more for pending applications. That brought the total dangerously close to the plan’s funding limit.

Congress could appropriate more funding, but it’s unclear whether that will happen. The legislation authorized $4 billion, but the Senate appropriated only $1 billion.

Though the White House is providing reassurances that dealers won’t lose money, that could happen based on cash-for-clunkers rules. Dealers are required to give qualifying buyers the $3,500 or $4,500 discounts, and then apply to the government for reimbursement. Dealers who apply for repayment after the funding runs out will not be reimbursed, according to the program’s rules.

“There’s a big concern among dealers that this thing may run out of money and they don’t want to be stuck holding the bag,” said Michelle Krebs, senior editor of AutoObserver.com.

To make matters worse, dealers are required to permanently disable the engines of traded-in clunkers before they can apply to the government for repayment, Krebs said. If payment is denied, the dealer is out the $3,500 or $4,500, and has a car with a ruined engine that can’t be resold.

“Dealers want to protect their customers and make sure they receive the rebates,” said Sackrison of the

Orange County dealer group. “We have every confidence that our government will honor their promises. The opportunity to reopen the program or apply for more funds would certainly be welcome.”

The problem:

Money.

In less than a week Cash for Clunkers has exhausted its entire  one billion dollar budget. The program was supposed to run until November 1st or until the 1 billion dollar budget was spent.  Apparently we are not going to make it until November 1st.

While everyone wants to be responsible for a successful project, this unexpected response is creating havoc in Washington.

What can we learn from the possible suspension of cash for clunkers ?

I know there will be a lot of commentary on this situation.  There will be a lot of blame.  There will be victory claims for establishing such a successful plan.  And there will be criticism for poorly estimating the longevity of the program.  But I want us to think about what this teaches us about ourselves?

  1. Money still doesn’t grow on trees. It does appear though that even in Washington there are limits.  If the budget is exhausted will the program really be discontinued?  Time will give a detailed response.
  2. People love to think they are getting a good deal. This program was so popular because people accepted that it was a good deal.  I wonder how many people were planning to buy a new car before all this?  How many folks saved up the cash?  How many just reacted to a great deal and deviated from their personal game plan?  Here is when I think you should buy a new car.
  3. The early bird still gets the worm. I guess if you snooze, you still lose.  I feel bad if you were pumped about getting a new car and now that opportunity might be lost.  Next time there is a similar program (if there ever will be) I bet people will be lining up just like they do for concerts or an opportunity to try out for American Idol.
  4. Yes, you still have to give to Caesar what belongs to Caesar.  If you think this was a waste of money, I just wanted to remind you that God’s Word has not changed overnight – give to Caesar.

The morning will tell the full fate of the Cash for Clunkers program.

Any other lessons we can learn from Cash for Clunkers?  How do you feel about these recent developments?

Comments

  1. says

    I think that the government will find a way to continue their “successful” program. The more money they can give away, the more voters they get!

    In reading articles here in Minnesota there are a lot of angry car dealers right now because they’ve written up tens of deals – and stand to lose a lot of money if the government doesn’t follow through with the plan.

    And these are the folks we want to administer our health care. I shudder to think!
    .-= Peter´s last blog ..Cash For Clunkers Program Suspended After Only A Few Days. Here Is Why =-.

  2. says

    As with most government programs, the success of the “cash for clunkers” program is not measured in how well the consequences of the program align with the stated goals of its advocates. Nor is it measured by any economic impacts the consequences might cause. Instead, just like the example of the public library in George Dance’s recent article about Booze and books, the success is measured by participation or usage, not by any measure of the value provides or harm it does to our economy. The trick is to define the program specifically so that it has a known demand so the usage is high. Media spin and politics will make sure the right people hear the program was successful and beneficial. I heard a bit on NPR just today about the downstream benefits that recycling all these old cars has. Ridiculous of course, but the perception amongst the voters is far more important than the actual results and consequences. Certainly there will be follow-on programs, cash for major appliances, cash for tools, etc.

Leave a Reply

Your email address will not be published. Required fields are marked *