Cash for Clunkers Stimulus is a Huge Success!

[Neko13]

I'm not an American, but I am on some car related forums that are primarily US based, so I did see some of the things that were said on this. All in all, I think the program's 'success' is relative. If you say success based on the fact the funds were expended so fast, then yes. If you say success because you could possibly buy a car cheap with the process, then maybe, but if you say success because it's a massive benefit for the US economy, then no.

The government gives you money if you trade in a car for a car that runs atleast 2 MPG's more efficient. This car has to be one from an approved list of vehicles. This list only contains more environmentally friendly vehicles, since the government is so hung up on getting the US population to drive more environmentally friendly.

So if we look at the list... How much is actually going toward the industry that is the 'face' of the problems in the car manufacturing? The so called 'Big Three', or by now 'Big Two'? Well, the list contains a heap of cars, but some 15 to 20% is Ford and General Motors. The majority of the list goes to non US brands like Toyota for instance. So most money spent might very well not contribute the US economy at all. While partly there might be manufacturing plants in the US for those brands that benefit, part of the money is still going to go abroad. Not by fault of the government tho. They're supposed to provide a level playing field for everyone on the market.

What the government of the USA however is forgetting is the fact that GM and Ford never really needed or cared to make a lot of environmentally friendly cars. Driving a car in the US is cheap, and as such the weight of public demand was on the bigger and more environmentally unfriendly cars. The governement stepped in there with the CAFE standards, demanding that for every 'gas guzzler' and equal amount of smaller more economical cars would be made, so the average MPG of the entire fleet of that manufacturer would rise to a certain value. So the government demanded the Ford and GM produced more smaller and environmentally friendly vehicles, while the public didn't want those. The result, a lot of spent money on the manufacturers side, loads of smaller cars on the lot with no people to buy them, which is what partially caused the whole issue with the auto industry.

In Europe we don't press the manufacturers to make more small cars. We raise taxes and gas prices and end up with the public demanding it. The manufacturer will tend to the requirements of the public and the same result is reached. America tries to do it the other way around: provide for something, and the public will switch on it's own, seeing there isn't an option to take something else available anymore.

Now as to the program, personally I see the destruction of a 'clunker' as a destruction of resources and money. It's foreseeable that anyone buying a car would be trading up. So why destroy a 'clunker'? If someone else comes along that can adhere to the trade-up by the 2 MPG, and buy said 'clunker', you'll be providing more revenue for the auto industry and let someone else that could possibly not afford a new vehicle trade up thus going more environmentally friendly on the second stage as well.

I've seen the destruction of the vehicles on Youtube ( http://www.youtube.com/watch?v=JlVljhcnul0 ), and it honestly hurts me to see a car that looks good, isn't that old, and runs fine (and could provide a good deal of miles more) being destroyed by the process.

All in all, the program isn't yielding the benefits to the economy it could have based on the fact that part of the money might never see a return into the US economy, and the fact that there are a lot of 2nd hand cars that are still very good are being taken off the market completely (that's gonna leave a gap in the oldtimer fleet in about 20 to 30 years), instead of being marketed yielding more economic transactions/benefits.

[mgz]

I'm not an American, but I am on some car related forums that are primarily US based, so I did see some of the things that were said on this. All in all, I think the program's 'success' is relative. If you say success based on the fact the funds were expended so fast, then yes. If you say success because you could possibly buy a car cheap with the process, then maybe, but if you say success because it's a massive benefit for the US economy, then no.

The government gives you money if you trade in a car for a car that runs atleast 2 MPG's more efficient. This car has to be one from an approved list of vehicles. This list only contains more environmentally friendly vehicles, since the government is so hung up on getting the US population to drive more environmentally friendly.

So if we look at the list... How much is actually going toward the industry that is the 'face' of the problems in the car manufacturing? The so called 'Big Three', or by now 'Big Two'? Well, the list contains a heap of cars, but some 15 to 20% is Ford and General Motors. The majority of the list goes to non US brands like Toyota for instance. So most money spent might very well not contribute the US economy at all. While partly there might be manufacturing plants in the US for those brands that benefit, part of the money is still going to go abroad. Not by fault of the government tho. They're supposed to provide a level playing field for everyone on the market.

What the government of the USA however is forgetting is the fact that GM and Ford never really needed or cared to make a lot of environmentally friendly cars. Driving a car in the US is cheap, and as such the weight of public demand was on the bigger and more environmentally unfriendly cars. The governement stepped in there with the CAFE standards, demanding that for every 'gas guzzler' and equal amount of smaller more economical cars would be made, so the average MPG of the entire fleet of that manufacturer would rise to a certain value. So the government demanded the Ford and GM produced more smaller and environmentally friendly vehicles, while the public didn't want those. The result, a lot of spent money on the manufacturers side, loads of smaller cars on the lot with no people to buy them, which is what partially caused the whole issue with the auto industry.

In Europe we don't press the manufacturers to make more small cars. We raise taxes and gas prices and end up with the public demanding it. The manufacturer will tend to the requirements of the public and the same result is reached. America tries to do it the other way around: provide for something, and the public will switch on it's own, seeing there isn't an option to take something else available anymore.

Now as to the program, personally I see the destruction of a 'clunker' as a destruction of resources and money. It's foreseeable that anyone buying a car would be trading up. So why destroy a 'clunker'? If someone else comes along that can adhere to the trade-up by the 2 MPG, and buy said 'clunker', you'll be providing more revenue for the auto industry and let someone else that could possibly not afford a new vehicle trade up thus going more environmentally friendly on the second stage as well.

I've seen the destruction of the vehicles on Youtube ( http://www.youtube.com/watch?v=JlVljhcnul0 ), and it honestly hurts me to see a car that looks good, isn't that old, and runs fine (and could provide a good deal of miles more) being destroyed by the process.

All in all, the program isn't yielding the benefits to the economy it could have based on the fact that part of the money might never see a return into the US economy, and the fact that there are a lot of 2nd hand cars that are still very good are being taken off the market completely (that's gonna leave a gap in the oldtimer fleet in about 20 to 30 years), instead of being marketed yielding more economic transactions/benefits.

both ford and gm have hybrids and small ass cars that get like 35 or 40 mpg

[bcr123]

The #1 and #2 vehicles being purchased under the CARS program are both Ford.  The top "foreign" car is at #6.

http://money.cnn.com/2009/08/07/autos/cash_for_clunkers_sales/?postversion=2009080704

Rank     Vehicle     
1    Ford Escape    
2    Ford Focus    
3    Jeep Patriot
4    Dodge Caliber
5    Ford F-150
6    Honda Civic
7    Chevrolet Silverado
8    Chevrolet Cobalt
9    Toyota Corolla
10    Ford Fusion

[Natheria]

The biggest problem Ive seen with the program (as it's already been mentioned) is the destruction of perfectly fine used cars that could have been used for someone who, oh i don't know... can't afford a new car in the first place. You have a surge in demand for new cars and destroy the old ones outright so you're going to see a price hike for both new and use cars. The dealerships have already been telling people to take the sticker price or go home when they try to haggle the price down a few grand and get the C.A.R.S refund so in reality there are allot of people who really aren't getting a good deal from this. The only thing you can really expect from this is a general average MPG increase in the fleet.

[mgz]

The biggest problem Ive seen with the program (as it's already been mentioned) is the destruction of perfectly fine used cars that could have been used for someone who, oh i don't know... can't afford a new car in the first place. You have a surge in demand for new cars and destroy the old ones outright so you're going to see a price hike for both new and use cars. The dealerships have already been telling people to take the sticker price or go home when they try to haggle the price down a few grand and get the C.A.R.S refund so in reality there are allot of people who really aren't getting a good deal from this. The only thing you can really expect from this is a general average MPG increase in the fleet.

the plan isnt to help poor fucks, its to help the country as a whole get more fuel efficient cars and bring back some of the MASSIVE companies that were in slumps since millions rely on those companies for jobs.

So if you get 500k people to go from a old car or truck that gets 10-20 mpg high way to something that even gets 25 mpg it adds up very quickly to much less oil used in the country which works towards lowering our foreign oil intake and overall energy consumption. This of course saves the country tons of money.

It may not be the biggest success financially for the country but it is doing what its supposed to

[Neko13]

Most of the earnings on cars aren't made on the sale of new cars... they're maid on the maintenance of existing vehicles... Which are not sold onward if they're still somewhat decent, but instead are destroyed (thus destroying any potential future maintenance costs from benefiting the economy).

So while it does add fundings to the economy, it's not adding as much as it could...

[Rhino]

sounds kind of a rip off to me - spend more money to save money there some people that are trading in for cash for clunkers believing their getting a good deal  but they are actually paying more money than their saving

[relic2279]

sounds kind of a rip off to me - spend more money to save money there some people that are trading in for cash for clunkers believing their getting a good deal  but they are actually paying more money than their saving

That's where economics comes into play. You need your population spending money in the type of economy we have to have a successful economy. Saving during a recession leads to a vicious circle which eventually leads to deflation of our currency. Ala the great depression. In that aspect, cash for clunkers is a huge success. People are spending money. You republicans out there should be elated. The rich get richer. Excellent for capitalism.

[Rhino]

sounds kind of a rip off to me - spend more money to save money there some people that are trading in for cash for clunkers believing their getting a good deal  but they are actually paying more money than their saving

That's where economics comes into play. You need your population spending money in the type of economy we have to have a successful economy. Saving during a recession leads to a vicious circle which eventually leads to deflation of our currency. Ala the great depression. In that aspect, cash for clunkers is a huge success. People are spending money. You republicans out there should be elated. The rich get richer. Excellent for capitalism.

thats fine for them,but lets  if i have my 2 k clunker (runs perfectly)and if i trade it in for C for C ill go 3 k more in debt
so in order to save the economy i have to go deeper in debt ?

[relic2279]

thats fine for them,but lets  if i have my 2 k clunker (runs perfectly)and if i trade it in for C for C ill go 3 k more in debt
so in order to save the economy i have to go deeper in debt ?

It won't run perfect forever. You will need to start putting money into it. 800 there, 400 there, 1k there just to keep it running and getting ripped off while doing so if you cannot do it yourself.

These newer Hyundai's, Kia's and such have a 100k mile/ten year power train or bumper to bumper warranties. And they're super cheap. It would easily save you money in the long run, and not only that, you would have some reliability. Not to mention, saving you money on gas, 

[nates1984]

Saving during a recession leads to a vicious circle which eventually leads to deflation of our currency.

Explain why this is bad using your own words.

Go ahead, because I bet I can show error in your reasoning. In fact I'll give you a head start, because I know what some of your reasons are going to be: Demonizing deflation because it intensifies the sting of bad economic decisions is ridiculous; instead you should demonize the bad economic practices instead of the things around it that may make it worse. It's like saying wood is bad because if you throw it on a fire it makes the fire worse.

[relic2279]

Go ahead, because I bet I can show error in your reasoning. In fact I'll give you a head start, because I know what some of your reasons are going to be: Demonizing deflation because it intensifies the sting of bad economic decisions is ridiculous; instead you should demonize the bad economic practices instead of the things around it that may make it worse. It's like saying wood is bad because if you throw it on a fire it makes the fire worse.

Actually, none of those thoughts crossed my mind.
I was thinking more along these lines:
"Many American households’ savings are tied up in investments that will go sour in deflation: i.e. stocks, bonds, commodities and real estate. As if a wipeout of life savings isn’t bad enough, declining prices (one of the effects of deflation), means lower profits for companies. In turn this means layoffs and increased unemployment."
Citation: The Depression. That's exactly what happened.

Not to mention:
http://www.elliottwave.com/deflationary-spiral.aspx


A deflationary spiral is as bad as, or worse than hyper-inflation. Sounds good at first, and indeed it is. But only at first.

[nates1984]

Actually, none of those thoughts crossed my mind.

They're probably the best arguments. >_>

The issue of debt really is the biggest concern with deflation, and you're not even using it as your argument. =\

"Many American households’ savings are tied up in investments that will go sour in deflation: i.e. stocks, bonds, commodities and real estate.

Explain it in your own words. You have made a claim, now support it. Why does it go sour?

As if a wipeout of life savings isn’t bad enough, declining prices (one of the effects of deflation), means lower profits for companies. In turn this means layoffs and increased unemployment.

The purchasing power of a currency would increase in deflation. Therefore, in comparative terms, it really costs the same even if the sticker price has a lower number on it. The only issue companies would face is the problem of decreasing wages so the employees receive the same comparable pay in a deflationary environment. That can be difficult to do, employees do not like having their pay reduced.

Falling prices while the currency's purchasing power remains the same is a different discussion all together, in that situation your argument is moot. In fact, that's what has happened in America (think electronics and imported products from the third world).

If you invoke deflation you automatically refer to the currency, not the price of goods, the price changes in the price of goods (in both deflation and inflation) is nothing but a reflection of what the currency is doing. This argument inherently assumes the currency's purchasing power stays the same, which is retarded.

Citation: The Depression. That's exactly what happened.

Deflation didn't create the Great Depression's problems. If you think it did you're ill-informed.

Elliott Wave International (EWI) is the world’s largest market forecasting firm.

Fuck commercial sources. Put up something academic. Failing that do something journalistic. Commercial sources always reek of ulterior motives.

Also: The president of EWI worked for Merrill Lynch.

Here's an article written by a professor in France who supports my views: http://mises.org/story/1254

A deflationary spiral is as bad as, or worse than hyper-inflation. Sounds good at first, and indeed it is. But only at first.

Explain why in your own words. Your source is unacceptable. Also, if the "deflationary spiral" theory is true, explain why computers and other electronics notorious for becoming obsolete and cheaper in a small time frame continue to sell.

[relic2279]

Explain it in your own words. You have made a claim, now support it. Why does it go sour?

What do you mean by 'in my own words' ? If I want to support it, I have to find a source who says it better than I can.

These two sum it up quite nicely:

http://www.economist.com/opinion/displayStory.cfm?story_id=13610845&source=hptextfeature

http://money.cnn.com/2008/10/17/news/economy/deflation/?cnn=yes

Your source is unacceptable.

One of these should tickle your fancy on the effects of deflation as well as explanations on why inflation is the lesser of two evils:

http://money.cnn.com/2002/11/07/news/economy/deflation/
http://www.forbes.com/2008/12/09/deflation-lending-saving-fan-ii-in_ags_1209soapbox_inl.html
http://www.nytimes.com/2009/04/21/business/global/21deflate.html
http://krugman.blogs.nytimes.com/2009/02/04/about-that-deflation-risk/
http://economics.about.com/cs/inflation/a/deflation_2.htm
http://www.youtube.com/watch?v=HLXhqME809E
http://blog.mises.org/archives/009042.asp
http://en.wikipedia.org/wiki/Gold_standard#Gold_standard_from_peak_to_crisis_.281901.E2.80.931932.29

[nates1984]

If there's a deeper point to my challenge of you relic, it's that I'm tired of people simply repeating what they heard elsewhere and acting like it was their big brain that came up with it. One: If you don't understand something don't talk about it. Two: If you don't know about it you can't accurately judge the legitamacy of the source.

I'm not reading the hundred links you've posted. I'm not discussing it with those writers, I'm discussing it with you. Sources only work if there is a specific dispute. Sources alone can't build you an argument.

When you're ready to reply to my posts with your own words rather than trying to post a million links I'll be happy to discuss it with you. Otherwise shut up about economics.

99% of the time if someone posts a shitload of links it simply means they don't know jack about the subject being discussed.

In the time it took you to find those links you could have just replied yourself, but of course you don't know shit about the subject do you? It's ok, we'll do this slowly if need be.

Just this question relic: You have made a claim, now support it. Why do "stocks, bonds, commodities and real estate" go sour in a deflationary period?

[mgz]

sounds kind of a rip off to me - spend more money to save money there some people that are trading in for cash for clunkers believing their getting a good deal  but they are actually paying more money than their saving

That's where economics comes into play. You need your population spending money in the type of economy we have to have a successful economy. Saving during a recession leads to a vicious circle which eventually leads to deflation of our currency. Ala the great depression. In that aspect, cash for clunkers is a huge success. People are spending money. You republicans out there should be elated. The rich get richer. Excellent for capitalism.

thats fine for them,but lets  if i have my 2 k clunker (runs perfectly)and if i trade it in for C for C ill go 3 k more in debt
so in order to save the economy i have to go deeper in debt ?

the purpose of the program isnt so every fucktard with a clunker gets a new car, its to try and get some people who may be in the position to get a new vehicle or have a piece of shit car that barely runs, trade it in for something that gets way better gas mileage and get a good discount by doing so, dealers are already pricing cars at all time lows to try and move them, the larger dealers are more then happy to deal with people and take cash for clunkers even though they know for every vehicle sold with the program they will have to wait 3-6 months to see the money from the government because thats just how it works.

Idea being if i have a 1998 chevy blazer with the v6 that gets 20 mpg highway or 22 highway and 15 city, but cant normally afford a new car because this car is worth maybe 1000 or 1500 bucks, it can be worth 4500$ at the dealership and i can get a new small affordable car, that is in the 8-12k dollar range before discounts.
That will do 35 mpg highway and 25mpg city.
Now i dont know about you but 5000$ finance on a 3 year loan really isnt that much for payments its like 150 a month

[nates1984]

the purpose of the program isnt so every fucktard with a clunker gets a new car

I could argue that it was the purpose, but that's inconsequential.

The reality is that every fucktard with a clunker is getting a new car.

Ideals are great, but eventually you just have to face how things really are (and really work) in reality.

Besides mgz:

so in order to save the economy i have to go deeper in debt ?

This is exactly what the American government is saying, not just with cars but with everything. He made a valid point and you sidestepped it entirely.

[vicious796]

Now you're toying with the concept of personal debt and flat out stating that assets are not a part of personal wealth. Is it really going into debt when you're gaining an asset? What you're buying has a higher value (and tend to have lower depreciation) than what you had before. Therefore, it's safe to call it an investment. You're purchasing security, fuel effeiciency, and the ability to hold on to something with value now that will have a MUCH higher value in the upcoming years than most vehicles being traded in.

While, at the same time, pumping cash into the economy. No, not every "fucktard" with a clunker is getting a new car, sadly I still see many old vehicles on the road. Many of them don't apply to CFC as they were fuel efficient back in the day and barely stand above the minimum grounds now. The program is allowing people who were almost able to buy a new car but just out of reach to be within reach. It's providing reliable, safe, fuel efficient transportation to people and, in turn, enabling them to attempt to get a better job (increasing the length of their commute) or getting them on campus easier.

Let's also take MPG into the picture as well. My old Dodge Stealth R/T cost me nearly $70 to fill up every week with my current commute but my Neon only costs me $25 to do the same. So driving the neon saves me $45 a week, $90 a paycheck, $180 a month, $2,160 a year on average. That's $10,800 over a 5 year period (a common finance period for a car) on gas alone. Also consider the difference in maintenance and the possibility of the Stealth dying and I would STILL have to get a different car.

So, by the literal definition of the word, yes you'll be going into "debt". That means you'll have a loan you have to pay every month like every adult in the country but you'll also have something of value and save money on the little things you're not discussing.

[mgz]

the purpose of the program isnt so every fucktard with a clunker gets a new car

I could argue that it was the purpose, but that's inconsequential.

The reality is that every fucktard with a clunker is getting a new car.

Ideals are great, but eventually you just have to face how things really are (and really work) in reality.

Besides mgz:

so in order to save the economy i have to go deeper in debt ?

This is exactly what the American government is saying, not just with cars but with everything. He made a valid point and you sidestepped it entirely.

What the US government is saying and doing are 2 separate things, you DO NOT have t go deeper into debt to help the economy but people do have to spend money.  And just because people are retarded and wasting money they cant afford to doesnt mean everyone is, there are real estate millionaires being made in this economy to come, and people who became millionaires from the stock swings.

Fact is what you perceive as the truth isnt the truth, or the car manufacturers would have reported much better sales numbers

[Neko13]

On the danger of making this thread go off-topic from the Cash 4 Clunkers program... Money as Debt:

Money as Debt - Part 1
Money as Debt - Part 2
Money as Debt - Part 3
Money as Debt - Part 4
Money as Debt - Part 5

On the Cash 4 Clunker program, I still feel it could've been better if the 2nd hand cars weren't scrapped directly, but only if they were really clunkers. If a car is still relatively new, I'd say move it on to the 2nd hand market, and get even worse cars off the road, while making sure the dealers will have an income from parts and such.

As it is, I foresee a load of sales going on, sure... but work in the shop drops. All those new cars have relatively few issues, and do not require replacements parts for a while. And the dealers usually make the most money off the maintenance of the vehicles, which is what is effectively denied over the oncoming period. So while income is good now, it will drop eventually, possibly leading to a long period of slow business. And that could lead to layoffs, possible bankruptcy's and whatnot.

Of course I do admit this is pretty much doom-thinking the whole deal, but it is something that could potentially come to pass.