yes, i did actually transpose the "l" from the word "clunkers" over to "cash" on purpose. seems to be quite a popular topic of late, so i figure i might as well say something too. anyway, the cash for clunkers program has proven to be at least decently popular, with people trading in older vehicles for something modern and fuel efficient. definitely a good idea on several fronts. but there of course were gripers. and as usual, they end up being rather insignificant...
some environmentalists have expressed concern that the people would only go for the low end of the mileage requirements. (data has proved them wrong-average replacement gets 10 mpg more than what it's replacing.) they also were concerned that by junking an old car, you negate any benefits because a new one has to be built. but by and large, i do not think people are placing an order for a new one. they are buying a car that is already on the lot aka a car that has already been built. since both cars are already built, do we want a more polluting or less polluting vehicle being driven?
other people were concerned that taxpayer dollars are supporting foreign companies since toyota and honda share top spot with gm and ford in terms of cars being sold. they seem to forget that honda and toyota (as well as nissan and kia is building one in ga) all have several giant factories in america, mostly in the south. meanwhile, gm and ford have steadily been moving their plants to mexico for awhile, and also have some in canada (as do toyota and honda). but when one reads the new car sticker in the window, they would soon realize that the average honda or toyota is just as much american as their gm or ford counterparts. (and in some instances actually contain more american parts or final assembly than the "american" cars.) due to the volume of cars involved, it becomes increasingly prohibitive to manufacture cars in japan and ship them over. so no need to boohoo over that since i'm gonna guess that probably 50-70% of the cars being bought are primarily american in parts.
then some were concerned as to why the program costs so much and even more so wonder why we're spending more money on it. first of all, they're not getting more money to support the program. the program was already funded from the outset (by the stimulus act of 2009) with about $4 bn, but initially they figured they'd just start with $1 bn. that apparently wasn't enough, so now they have to go for $2 bn more. but the money was already there, just hadn't been appropriated yet. beyond that, let's say it was $4 bn total. that's $4 bn to the people who paid taxes to fund it in the first place. over the past year or so, the government has basically given several companies blank checks under the premise that they're "too big to fail." some of them turned around, and despite their horrific performance for the year, proceeded to give out a "performance bonus" to the executives. i can guarantee that none of the bonuses was anywhere near the absurd sum of $4500 maximum available under the program. (no, i do believe they were bigger by substantial margins, probably around the order of at least 1000x bigger.) but as the sputtering economy will attest to, the real entity that is "too big to fail" is actually the consumer. despite marvelously beautiful sale prices, companies have still lost massive amounts of money over the last three-five quarters as the consumers all stayed home except for essentials. why? because they were all on the verge of (or some already had) "failure" in the form of foreclosure, bankruptcy, or job loss (or combination of three). something is wrong with american government if they will use our taxpayer money to write blank checks to corporations on the verge of failure but can barely find a way to help us, the payers.
however, there is one concern with the program. currently, the federal government funds highways with guess what?! gas taxes! raising average mpg by of over 700,000 cars at once by 10 will have an immediate effect on highway funding, which was already $8 bn short for the year. this is in addition to the collectively lower driving due to higher gas prices as well as the general trend of mpg to improve due to normal replacement of old cars. when congress gets back from summer recess, they should consider raising gas tax at least $0.10/gallon. will this possibly have a negative effect on commerce? yes. but we cannot keep coming up with "emergency funding" every couple months because there's not enough money. and beyond that, this country currently has one of the worst transportation systems in the industrialized world, getting a grade of "d" from the engineers. if our economy is to remain viable, we need proper transportation. while of course highways are only one facet, they are still the most used and therefore need the dollars. the negative cost of an inefficient highway will soon outweigh the negative effects of an increase in the gas tax. with the memory of lackluster fresh in everyone's minds, it's doubtful that an increase in the gas tax will then lead to a runup in gas prices reminiscient of last year's record highs.
anyway, those are some of my thoughts on the cash for clunkers program that is currently going on. comment, let me know what you guys think
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