Cash for clunkers … the downside

Cash for clunkers is a bill, written by congress, which is designed to remove as many gas guzzling older cars from the marketplace as quickly as possible. Here’s how it works: If you own an operating 1984 or newer vehicle that has been insured, registered to you for the past year, and gets a combined 18 miles per gallon or less, you can qualify. You can go to a website to discover whether your car gets less than 18 miles per gallon.

If you trade the gas guzzler in for a new car with a fuel efficiency rating that is four miles per gallon better, you can receive a $3500 voucher which will be applied directly to the new vehicle purchase. If the new vehicle has a fuel efficiency rating that is ten miles per gallon better, you can get a voucher for $4500.

Cash for clunkers seems like a good idea on the surface.

The plan is a boon for new car dealerships as consumers run to the showrooms to take advantage of the offer. Chrysler is even matching the subsidy with an equal amount of cash off the purchase of those cars that qualify for the program. Another industry that stands to benefit is the used auto parts market. Traded clunkers must be rendered inoperable and crushed, but not before the salvage yard strips off all the working used parts.

The cash for clunkers program will help beautify the highways. Some old cars are ugly, with hanging bumpers, rusted rocker panels and brandishing twenty-year-old bumper stickers. Eventually there will be no more rusted hulks lying at the bottom of ravines or out in farmer’s fields. Yeah, right.

Some environmentalists object to the cash for clunkers program.

Many environmentalists point out that a large number of perfectly serviceable vehicles with years of performance left will be pulled from the marketplace. In most cases, recycling older cars by repairing and reselling them makes more sense than relegating them to environmentally unfriendly junkyards.

There is another downside.

What’s to be done about young people just entering the job market who need a car to get to work but can’t afford a new one? How about the single mother who is barely making ends meet, owns a car that’s on its last legs and needs to replace it, but can’t afford new car payments? What about low income families who can scrape up just enough money for a used car? What are the thousands of people who own and work for used car lots to do when their inventories are dramatically reduced? And how about the traffic death toll that will climb as Americans increasingly drive smaller and lighter cars?

The government cash for clunkers program will pull tens of thousands of viable used cars from the market. According to my friend at the automotive group, there is nothing wrong with the older cars that they sell. They are reconditioned, safe, affordable, often sold with warranties, and ready to meet the transportation needs of a large segment of the population that just can’t afford to purchase a new or late model car.

Cash for clunkers is another example of a government program with high cost, estimated at over a billion dollars, which is stealthily picked from the pockets of just about everyone who pays taxes. This program looks great on the surface, but it was instituted with no consideration of the consequences.

And so it goes, whenever the government over regulates a segment of the free market, the little guy gets hurt.
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