Wednesday, July 29, 2009

More on Cash for Clunkers and Clunky Paperwork

Car dealers reported problems with the government's online system to get the transactions approved by the National Highway Traffic Safety Administration, which is running the program.

Scott Lambert, vice president of the Minnesota Auto Dealers Association, said he was "astounded" to learn at a meeting Tuesday representing about 150 Minnesota dealers that not one has had a deal approved. "We had dealers representing 1,500 to 2,000 transactions," he said. "We asked how many had a deal approved yet, and not one hand went up."

Lambert said the government has created a program that's "so big and cumbersome that it can't find a way to accept anything. We're sending in good, reliable deals." It's nerve-racking for the dealers, he said, because they have given the customer $4,500 and now the dealers need to be reimbursed.

The program took effect July 1, but traffic at dealerships is up now because dealers had been reluctant to participate until the rules were published, which happened Friday. The program expires once the $1 billion is gone or Nov. 1, whichever comes first, prompting many to take advantage early.

~From today's Twin Cities Star Tribune

See related CD post here.

13 Comments:

At 7/29/2009 11:06 AM, Anonymous Anonymous said...

Typical...

In undertaking a stimulus, you have the government thinking that it not only knows best what form a stimulus should take and who should get it but also that they could effectively set up the infrastructure to monitor and deliver it.

Without even arguing the merits of the need for stimulus, how much easier would it have been to just say that no one owes any taxes (or only owes x% of their income and/or payroll taxes) for 2009.

 
At 7/29/2009 11:09 AM, Anonymous Norman said...

Economic health is measured by GDP, ie, what is produced. There is good economic theory to validate this concept but its not enough. Throwing away useable autos and replacing them with newly produced ones does not in reality translate into a higher standard of living. Japan has been junking (or sending them to Russia, China, etc) good cars in the name of ecology for decades and look where it has gotten them. The best measure of the economic level of a country is what they actually have and can keep using. A throw-away society is going to be a poor society.

 
At 7/29/2009 12:05 PM, Blogger Walt G. said...

Wasn’t it sort of dumb to approve deals before last Friday when the final rules were published? Even the rule said on page 6, which was published June 24, 2009, it would be “prudent” for the dealers to wait. Why was Scott Lambert “astounded” no deals were approved before the rules even went into effect? This is, in reality, an imprudent dealership story.

 
At 7/29/2009 12:16 PM, Blogger QT said...

People are trading perfectly useable cars for debt and a sweetner courtesy of taxpayers.

The U.S. savings rate has only recently reached 6.9% up from 0% several years ago. Rather than realize the role of excessive leverage in the sub-prime mortgage crisis and the meltdown in the financial sector of RMBS, CMOs, CLOs, CDOs, the democrats are again ginning the game in favour of GM at public expense. These attempts at picking winners and losers never seem to lose their appeal despite the evidence that they don't work...ie. Chrysler.

What is amazing is listening to Obama tell us that health care and education are responsible for the present financial crisis. How did this neophyte actually convince voters that he understood economics?

 
At 7/29/2009 12:39 PM, Anonymous Junkyard_hawg1985 said...

Norman said, "The best measure of the economic level of a country is what they actually have and can keep using. A throw-away society is going to be a poor society."

That is a great statement. Wealth is a far better measure of economic success than GDP or jobs. GDP and jobs are merely a means to obtaining wealth. Politicians often do stupid things like the "cash for Clunkers" plan that destroys wealth for teh sake of jobs because they forget what the goal is. If someone reading this really believes that jobs is what matters, ask a few of your friends if they would quit their job if Bill Gates gave them a billion dollars.

Finally, I think a quote from Milton Friedman is applicable here:

“When the United States was formed in 1776, it took 19 people on the farm to produce enough food for 20 people. So most of the people had to spend their time and efforts on growing food. Today, it’s down to 1% or 2% to produce that food. Now consider the vast amount of supposed unemployment that was produced by that. But there wasn’t really any unemployment produced by that. What happened was that people who had formerly been tied up working in agriculture were freed by technological developments and improvements to do something else. That enabled us to have a better standard of living and a more extensive range of products.”

 
At 7/29/2009 1:49 PM, Anonymous Anonymous said...

Cash for clunkers had 4026 vehicles sales on the first day, over $17M. http://www.detnews.com/article/20090728/AUTO01/907280438/1148/rss25

 
At 7/29/2009 3:21 PM, Blogger QT said...

Doesn't this program actually hurt lower income Americans, self-employed, family farms and small businesses?

By shredding older trucks, the government will crimp the supply of second hand trucks causing the price to rise to a new equilibrium.

Looks like there are 3 losers:

citizens who go further into debt
citizens who pay thousands more for used vehicles
taxpayers who get to foot the bill for the party

 
At 7/29/2009 4:12 PM, Blogger QT said...

GM reports $6b loss in the first quarter of 2009.

All government programs cost money to administer. Assuming that 1/2 of the money is paid out in rebates and even this is optimistic, that would be 111,111 vehicles.

The auto industry needs an increase in sales in the millions to turn things around.

Another money wasting boondoggle that does not make even a dent in the problem or perhaps, we should use the current vernacular, "cash for a clinker".

 
At 7/29/2009 8:23 PM, Anonymous Bill said...

This program had craziness written all over it from the start. QT points to the unintended consequence of raising prices of used vehicles by destroying part of the supply. In addition, the program destroys auto parts that could be used to repair and prolong the useful lives of other cars not involved in the program. The notion of improving gas mileage of the auto fleet seems to stem from a "gasoline theory of cost," i.e., estimate gas saving from converting to a more fuel efficient fleet, but ignore the cost associated with destroyed used automobile assets and the resources required to replace these destroyed assets.

The "stimulus" rationale of this program is based on the same "Broken Window Fallacy" that lead people to conclude that wars and hurricanes have silver linings since visible economic activity picks up.

 
At 7/29/2009 11:23 PM, Blogger QT said...

Bill,

Good point. Certainly does fit the "broken window" fallacy.

 
At 7/31/2009 9:29 AM, Blogger carstereis said...

Read this article: The Real Reason for the "Cash for Clunkers" Suspension. The ex car salesman blog shares exactly why they stopped the program. Even reports that some sales managers are calling asking for the money back because they were denied the rebate when the final paperwork was submitted but their car was already ruined by dumping a solution in the engine. They now have no car. Scary. See: http://tinyurl.com/ml9sdo

 
At 7/31/2009 9:39 AM, Blogger carstereis said...

Read this article: The Real Reason for the "Cash for Clunkers" Suspension. The ex car salesman blog shares exactly why they stopped the program. Even reports that some sales managers are calling asking for the money back because they were denied the rebate when the final paperwork was submitted but their car was already ruined by dumping a solution in the engine. They now have no car. Scary. See: http://tinyurl.com/ml9sdo

 
At 7/31/2009 10:58 AM, Anonymous Costanza said...

carstereis, that sounds like a scene out of National Lampoon's "Summer Vacation (Chevy Chase)"

 

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