More Cash for Clunkers — Was it the Right Move?by Tim Manni
Despite our doubts, the Senate has approved and President Obama has signed into law an extra $2 billion for the Cash for Clunkers program before Congress’s summer recess. Granted, the program seems to be a hit with consumers, but was approving the extra money the right thing to do?
We want to take a slightly different approach with this post and examine the negative effects that the success of a program like C4C can lead to.
The Used Car Market: With a program that’s designed to generate new car sales by destroying used ones, it only makes sense that the natural victim would be used-car dealers.
Furthermore, the owners of used vehicles which do qualify for C4C, but don’t trade them in, may soon find it difficult to find new or used parts.
Charities: Charities which collect vehicles for Americans in need depend on the donations of used, older vehicles — the exact demographic C4C is attempting to reduce. Roger Penn, the director of The Car Ministry — a charity which collects and disseminates auto donations — told NBC that they get calls all the time from individuals and employers who say, I can get a job, or I can give someone a job, as long as they have reliable transportation. By destroying such a mass quantity of the vehicles he depends on, Penn says auto charities like his could soon find it very difficult to provide their service.
Borrowing Tomorrow’s Demand: It’s no secret that the auto industry has suffered greatly from the lack of consumer demand over the last two years or so. And, while C4C has generated about 250,000 auto sales so far, it’s worth considering that this program has caused a false sense of demand, a demand which will inevitably reduce future demand.
C4C’s original, predetermined amount of $1 billion provided a temporary jolt to the auto industry just as it was intended to do. However, tripling the program will intensify the counter-productive aspects that emerged from this idea.