Aug 042009
 
Authors: Ian Bezek

America’s newest entitlement program has been a raging success in terms of popularity –/the Cash For Clunkers program almost immediately ran out of money before getting more financing due to overwhelming usage of the subsidy.

However, when one probes beneath the glossy paint job, we see that Cash For Clunkers is a junker.

There are numerous reasons why this feel-good program will leave a sour taste in our mouths.

For starters, let’s examine the Obama administration’s claim that Cash For Clunkers will help the environment.

On the face of it, the idea of getting old cars off the road and replacing them with newer fuel-efficient cars sounds good. However, there are several problems.

The old cars aren’t quite as old as you might think. An ABC news story showed a vehicle that was less than a decade old getting destroyed. These aren’t terrible cars. They are drivable working-condition cars.

In fact, many of the clunker cars are nicer than the vehicles that many students here on campus drive.

Car manufacturing is among the most environmentally damaging of industries. The mining of ores, smelting of steel and creation of plastics for the modern car are resource-intensive processes.

While we can recycle bits and pieces of the clunkers, the most resource-intensive part of the clunker, the engine, is destroyed. There is a gigantic amount of waste involved in destroying a whole fleet of operable cars to create new cars.

While there are certainly going to be environmental benefits from boosting the fuel efficiency of the average American vehicle, they are unlikely to outdo the cost of forcing the manufacturing of millions of un-needed new automobiles.

Beyond the dubious environmental benefits of this program, backers also claim that it will help poor people in particular and the economy as a whole. Not so fast on that count either.

The immediate effect that Cash For Clunkers has, of course, is that new car sales rise as people rush to get $4,500 for their vehicle worth far less than that. This is good for the economy.

But the program absolutely kills used car and automobile parts dealers and will also significantly harm auto mechanics. If Cash For Clunkers continues for any significant amount of time, hundreds if not thousands of small auto-related businesses will be forced to close, destroying countless jobs as the used car market dies on the vine.

Ironically, new car dealers will get hurt as well. While sales will rise in the short run, Cash For Clunkers will use up all demand for new cars now in 2009. Anyone remotely interested in getting a new car will buy this year while the handout is available.

Result: Sales drops precipitously when the handout ends as the majority of people wanting a new car will already have purchased one.

While new car dealers and the car manufacturers will have a good year for 2009, they will have un-naturally lean years in the future, leading to more job cuts, closures and bankruptcies.

Finally, this program will harm many people thinking they’re getting a good deal on a new car. While the seller of a clunker gets a nice handout now, they may still end up financially in worse shape.

A clunker by default is cheap to operate, insurance is much cheaper for a clunker and it is paid off of no-monthly finance charges. While the buyer of a new automobile will get a more fuel-efficient vehicle, they will also get a much higher insurance bill and burdensome monthly payment obligations.

Instead of owning an older vehicle free and clear, the buyer gets buried under a large pile of debt. Instead of spending money on goods he wants, the buyer instead sends checks to the finance company further stunting the economy.

Cash For Clunkers is unlikely to help the environment, it will inevitably cause rampant job losses across the used car industry and turn new car owners into debt slaves. In short, this lemon of a program should immediately be taken to the junkyard.

Editorials Editor Ian Bezek is a senior economics major. Letters and feedback can be sent to letters@collegian.com.

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