Its always somewhat interesting to look at the real objective of government programs. Cash for Clunkers was intended to provide financial assistance and an incentive for those people driving what are deemed to be less energy efficient vehicles.
The general rule of the program is if your car averages less than 18-20 mpg, you could qualify for the program. Now here is where it gets interesting. Once you trade in your car, it is destroyed. There is an actual government manual that requires dealers to pour water and glass into the gas tank in order to cease the transmission. (No, I didn’t make that up.) The intended result is one less non-fuel efficient car on the road. Ah, ok.
Here are a couple things to consider when evaluating the “success” of this program.
-The government is encouraging consumers to take on more debt when consumers should be looking for ways to pay off debt quickly
-While this is being billed as “relief” for consumers, the best thing they could be encouraging is debt relief, NOT adding more debt to someone’s personal bottom line. Why would we want someone to take on more debt (and pay the interest) for the trade off of 5-10mpg of fuel efficiency? The numbers do not work out.
Well, here is your answer:
-The government is making decisions with the taxpayers money and there is no personal financial liability tied to their decision. (Note: You must realize we are borrowing money to fund this program, right? This when the treasury should be looking to pay off debt)
-The government, which is now in the process of nationalizing banks needs to get the credit markets going again. However, what is best for the average consumer is to get out of debt, not add more debt.
-Lastly, the government has a direct interest in the ownership of the major auto companies. That is a clear conflict of interest.
Here is an interesting clip from Ron Paul speaking about the program.
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I agree with your view on cash-for-clunkers. If the new cars consumers were purchasing were much more fuel efficient, say they were in the range of 50-65 mpg, then I think it might be a worth-while investment in the long term. However, if consumers are being swayed into purchasing vehicles that are still only getting 25-30 mpg, then it may not be worth taking on the extra debt.
However, our economy is based on consumerism, we need to keep pumping money into our economy by purchasing more goods. When will this change? I don’t have the answers, and obviously the government doesn’t either. Any suggestions?
I believe it is changing now. The fallacy that debt creates wealth is being stood on it’s head. It is okay to consume; we all do. However, going into debt to consume non-productive assets (nice dinners, clothes, vacations) is a mistake as we are seeing now.