Rewarding the Ecologically Irresponsible with Taxpayer Dollars

Jon Markman breaks down the "Cash for Clunkers" bill now in Congress. One point I haven't seen made is what this may do the market for used vehicles that guzzle gas. What would stop me from overpaying Joe-Six-Pack for a gas-guzzler that today is only worth $500, but if the proposed bill becomes law would qualify me for a $3500-$4500 voucher? I could then turn around and trade it into a dealership in order to buy a new car and receive a voucher. Suddenly, the market for $500 clunkers becomes a lot hotter....how does $3400 sound for that 1990 Ford Ranger?

This bill seems like a complete waste of time, rewarding people who have been the most ecologically irresponsible through taxpayer subsidies. The money for these type of programs comes from somewhere us. If we really wanted to spend this type of money to boost GDP, why not cut all taxpayers a check instead of arbitrarily rewarding a select few? And if we really want to promote more fuel efficient vehicles, wouldn't a higher gas tax coupled with a rebate check or income tax cut--which could be weighted towards ALL lower income earners (not just the pickup drivers) in case they do not have the money to upgrade their gas-guzzler--be more efficent?

Here is an excerpt of Markman's analysis. He also noted that the biggest winners of the bill would be Honda (HMC) and Toyota (TM) as they have the most fuel efficient:

Although we should be happy with the short-term GDP boost, which would last only as long as the program was funded by Congress, the details of the program are disturbing.

You would get a $4,500 voucher if you bought a new car that got 10 miles per gallon better gas mileage than the one you traded in, or 5 mpg better when buying a light truck. For a $3,500 voucher, you would need to improve your mileage by only a ridiculously small 4 mpg, or 2 mpg when buying a light truck. The trade-in would have to be no older than a 1984 model and get 18 mpg or less. Your new car would need to get at least 22 mpg, while your new truck could get as little as 18 mpg.

Just as with the government mortgage plan that provides people who made the worst home loan choices the most money, the program's incentives would be skewed to favor the people who had been the most irresponsible. People driving the gas-suckingest vehicles would get the biggest vouchers. If you've been smokin' up the neighborhood with a 15-year-old rusted-out pickup that gets 10 mpg and is worth $500 on the private market, your fellow taxpayers would give you $4,500 for it so long as you promised to buy a new truck.

What a deal. For you, anyway.

No Disclosures

Comments

[jdavis45:]

Even with a $4,500 voucher most of the people driving "clunkers" won't be able to get credit to buy a new car or truck. They need to save their money for lottery tickets and cigarettes.

Jun 21 08:14 AM

[sethmcs:]

As I read the proposed bill Ford would be the biggest winner with light trucks.

Jun 21 09:55 AM

[Glenn Mercer:]

Remember that the bill, at least as I understand it, requires the person who trades in the clunker to show paperwork (e.g. a registration) proving that a) he or she has owned the vehicle for at least one year (thus in theory blocking people buying clunkers just to cash them in) and b) that the vehicle was road-worthy (thus in theory blocking the dragging in of rust buckets that were up on blocks for the last ten years, which would erase the environmental benefits). I don't know if enforcement of all this will work, but at least these issues seem to have been addressed.

Jun 21 10:33 AM

[jthorner:]

Truck and SUV buyers are the big winners here, not car buyers. Honda is not likely to be the major beneficiary.

Jun 21 11:08 AM

[john s. gordon:]

better idea -
you have to renew your state license plate annually & states need the revenue. epa 'estimated' gas guzzling for each make, model, year is a matter of record. just have the states put a surtax on your annual bill - none for 30 mpg, lots for 11 mpg. the 389 pontiac i used to drive would suffer greatly.
> jack

Jun 21 11:31 AM

[ex GM emp:]

Cash for clunkers is nothing but political smoke and mirrors and those opining on it are wasting their time and breath including these Alpha pundit, no nothings. Credit is not available for those 8 million that bought cars at the top of the NODOC loan era. 15, 16,17 million cars years are a distant memory and cash for clunkers, like the manufacturers rebates, just pull ahead sales at the expense of the future.

Jun 21 12:35 PM

[outinoz:]

That's great...lets just raise taxes on individuals some more


On Jun 21 11:31 AM john s. gordon wrote:

> better idea -
> you have to renew your state license plate annually & states
> need the revenue. epa 'estimated' gas guzzling for each make, model,
> year is a matter of record. just have the states put a surtax on
> your annual bill - none for 30 mpg, lots for 11 mpg. the 389 pontiac
> i used to drive would suffer greatly.

Jun 21 01:27 PM

[303820:]

HONDA IS NOT AN AMERICAN CAR COMPANY...EVERY $1 YOU GIVE TO BUY A HONDA $.90 GO TO JAPAN...EVERY PLANT THEY OPEN-UP A DETROIT PLANT CLOSES...HONDA IMPORTS 80% OF WHAT THEY SELL IN USA...HOW DO YOU THINK WE GOT IN THIS MESS!!!!!!!


On Jun 21 11:08 AM jthorner wrote:

> Truck and SUV buyers are the big winners here, not car buyers. Honda
> is not likely to be the major beneficiary.

Jun 21 02:07 PM

[303820:]

AS WE COMPETE WITH LOWER WAGES WE'LL HAVE LOWER TAX BASE...AS WE BUY MORE OF THOSE IMPORTS OUR JOBS BO AWAY...AS OUR JOB GO AWAY OUR TAX BASE GOES DOWN...REVENUE HAVE TO COME FROM SOMEWHERE...SO...LETS KEEP BUYING THOSE IMPORTS!!!

SELF DESTRUCTION IS WHAT WE'RE GOOD @!!!


On Jun 21 01:27 PM outinoz wrote:

> That's great...lets just raise taxes on individuals some more

Jun 21 02:13 PM

[TinyTim:]

Instead of the lieu tax that many states have which taxes the value of cars annually at registration (so new cars cot much more to register), vehicle taxes should be based on the age of the car. The older the car, the higher the tax. The Japanese have been doing this for years for environmental reasons and to promote new car buying.

Jun 21 03:15 PM

[TinyTim:]

"The trade-in would have to be no older than a 1984 model and get 18 mpg or less."

So this is targeting SUV's and pickups.

"owned the vehicle for at least one year (thus in theory blocking people buying clunkers just to cash them in) and b) that the vehicle was road-worthy"

I understand part B. What's wrong with A??
If they want them off the road, let people who can afford new cars pick them up. This is crimping the market.

Jun 21 03:21 PM

[slowdown:]

An who exactly are the ecological irresponsible???? would it be our government for giving the oil companies subsidies all these years when they were posting record profits??? when they should have been pumping money into the developement of alternative fuels???? And what about you...what have you done besides spew articles with no substance. It just so happens that today's cars and trucks take in dirtier air then they put out....but if you actually knew anything about automotive...you would have pointed that out...so...asside from boosting car sales and maybe saving a job or two...we get older cars that maybe don't have the cleaner burn technology off the roads and crushed (like the smoke spewing Toyota I followed last night) and put newer technology on the roads. And if it saves a job or two...I would think you of all people would be happy since your job depends on me and others pumping money into our 401k's so you can play with it.

Jun 21 03:43 PM

[slowdown:]

Another one of their protectionists policies.


On Jun 21 03:15 PM TinyTim wrote:

> Instead of the lieu tax that many states have which taxes the value
> of cars annually at registration (so new cars cot much more to register),
> vehicle taxes should be based on the age of the car. The older the
> car, the higher the tax. The Japanese have been doing this for years
> for environmental reasons and to promote new car buying.

Jun 21 03:45 PM

[slowdown:]

Yes please...let's put more of a tax burden on the people that have to use pickup trucks for their small business operations (ie: lawncare, construction, snow removal etc.).


On Jun 21 11:31 AM john s. gordon wrote:

> better idea -
> you have to renew your state license plate annually & states
> need the revenue. epa 'estimated' gas guzzling for each make, model,
> year is a matter of record. just have the states put a surtax on
> your annual bill - none for 30 mpg, lots for 11 mpg. the 389 pontiac
> i used to drive would suffer greatly.

Jun 21 03:50 PM

[carfreak:]

Another idea with no thought behind it.
Basically the dealers will offer you no trade in because they have to agree to destroy the car. So if your car is worth more than the rebate you lose. If your car makes 15 MPG and you drive 15,000 miles a year at $3.00 per gallon your gas cost for the year is $3,000. So your new car makes 25 MPG with the same miles and cost of gas your cost is $1,800. So you save $1,200 per year I wonder what car you can buy and only have a $100 per month car payment?

Jun 21 05:28 PM

[Jann Lee:]

Show me an American car that is more reliable than a Japanese car.There isn't one.70k miles if you are lucky before the countless trips to the repair shop start.


On Jun 21 02:07 PM 303820 wrote:

> HONDA IS NOT AN AMERICAN CAR COMPANY...EVERY $1 YOU GIVE TO BUY A
> HONDA $.90 GO TO JAPAN...EVERY PLANT THEY OPEN-UP A DETROIT PLANT
> CLOSES...HONDA IMPORTS 80% OF WHAT THEY SELL IN USA...HOW DO YOU
> THINK WE GOT IN THIS MESS!!!!!!!

Jun 21 05:40 PM

[RCB:]

I think the trade in must be turned over to a salvage yard and the engine and transmision crushed so the trade ins will not end up back on the roads.

Jun 21 05:43 PM

[librepublican:]

Except for guys like me that have to have a pickup for my business
Good idea though!


On Jun 21 11:31 AM john s. gordon wrote:

> better idea -
> you have to renew your state license plate annually & states
> need the revenue. epa 'estimated' gas guzzling for each make, model,
> year is a matter of record. just have the states put a surtax on
> your annual bill - none for 30 mpg, lots for 11 mpg. the 389 pontiac
> i used to drive would suffer greatly.

Jun 21 07:52 PM

[librepublican:]

THANK YOU
You are one of the first people to say that out loud! UNLESS you are already buying a new vehicle YOU CAN NEVER SAVE ENOUGH IN FUEL to pay the depr etc. (Exception: Someone that drives > 50,000 or more a year I expect)

I have been telling people that for years and most just don't get it; of course these are usually the same people that say they need a "Tax Write-off".
Amazing that they "notice" the extra $20 a week going out for gas but DON'T notice the additional $300 going out in additional car payments!

On Jun 21 05:28 PM carfreak wrote:

> Another idea with no thought behind it.
> Basically the dealers will offer you no trade in because they have
> to agree to destroy the car. So if your car is worth more than the
> rebate you lose. If your car makes 15 MPG and you drive 15,000 miles
> a year at $3.00 per gallon your gas cost for the year is $3,000.
> So your new car makes 25 MPG with the same miles and cost of gas
> your cost is $1,800. So you save $1,200 per year I wonder what car
> you can buy and only have a $100 per month car payment?

Jun 21 07:59 PM

[303820:]

PERHAPS A JAPANESE CAR IS WHAT YOU DESERVE!!!!www.consumeraffairs.co...


On Jun 21 05:40 PM Jann Lee wrote:

> Show me an American car that is more reliable than a Japanese car.There
> isn't one.70k miles if you are lucky before the countless trips to
> the repair shop start.

Jun 21 08:29 PM

[303820:]

HONDA IS NOT MUCH BETTER !!!www.consumeraffairs.co...


On Jun 21 05:40 PM Jann Lee wrote:

> Show me an American car that is more reliable than a Japanese car.There
> isn't one.70k miles if you are lucky before the countless trips to
> the repair shop start.

Jun 21 08:33 PM

[slowdown:]

Oh please...my husbands GMC 2003 pickup just rolled over 80k and it's never been in the repair shop until this week to put new tires on it...yes...he got 80,000 out of his tires...because he takes care of his vehicles and drives responsibly. My son's 1998 S-10 pickkup...also never in the repair shop and had 140k when we sold it last year...and thats after four years of a teenager driving it and it was a stick. The fact is...that my family has driven either Ford's or GM and very rarely have any of us had any problems with them. The 2003 replaced a 1994 that we bought new in '93...never in the repair shop except to have the windshield replaced. Then there's my brother with his Ford F150...his wife drives it now because she lost her company car and it was time for him to get a new on...also a '94...with 248k on it. The fact of the matter is...I drive 52 miles one way to work every day and I can tell you that I see just as many transplants on the side of the road as I do domestic.

On Jun 21 05:40 PM Jann Lee wrote:

> Show me an American car that is more reliable than a Japanese car.There
> isn't one.70k miles if you are lucky before the countless trips to
> the repair shop start.

Jun 21 11:19 PM

[Danny Newton:]

Why does paying $4500 for a $500 car seem foolish and a cap and trade scheme that has both an uncertain cost and an uncertain benefit seem smart?

Jun 22 12:24 AM

[Auto Junkie:]

What all of you folks fail to realize is that this bill will not stimulate anything or cost us tax payers much at all. Why is that? Because if you read through the bill you will discover that the miles per gallon rating that qualifies the trade-in for this program is based on the combined highway and city figures from fueleconomy.com. This means that very few vehicles will qualify. Those that do are owned by folks who bought them used. These owners are the type of buyers that would never be in the market for a new car because they can't afford one or choose not to. This is assumed because the only cars that qualify are older luxury models, or higher end trim level vehicles with bigger engines. These buyers will not be able to afford a comparably equipped new car which is why they buy used. They would not step down from an old Cadillac or Infinity to a Toyota Camry. This bill will not have many takers. Besides, not all dealers are required to participate. If you were a dealer would you want the extra cost and burden of sending trade-ins off for scrap? The $3500 that the government voucher is good for just would not allow enough profit for the extra costs. I would be more upset that the politicians wasted so much time on this useless bill that does not accomplish anything or benefit anyone.

Jun 22 12:42 PM

[SAUBW:]

I have a 2000 Focus with 250,000 miles, a 1998 Monte Carlo with 245,000 miles, a 1988 Suburban with 216,000 miles (of which I put on only 18,000 miles on over the last 5 years) and a 1989 DeVille with 165,000 miles on it. So, in general terms the quality/durability argument for foreign cars is greatly exaggerated nonsense. As importantly, when you purchase a domestic car it supports three additional domestic jobs; when you buy a "domestically-produced" foreign car it supports only one additional domestic job (except VW which supports less than one domestic job per new car sold here). Anyone who thinks that buying a foreign car does not kill American jobs is kidding themselves - but we can all argue about that at the bar when everyone except government workers are all unemployed together. A previous poster correctly pointed out that a buyer would still be lucky to come out "net" even with these big rebates because the depreciation is just too steep and the cost of new vehicles of all brands is so high anyway that it remains to be seen how many creditworthy people will take the risk of further indebting themselves in these uncertain times. By the time you drove a more fuel efficient new SUV or light truck from the lot to your home it would have dropped in value close to the $4,500 maximum in this giveaway. So, I am not convinced that even this giveaway is enough to take the risk at this point in time. But I am kicking it around and if the government stops screwing with everything long enough to get our bearings I just might take them up on it... But it would definitely be a domestic vehicle if I did do it.

Jun 22 01:57 PM

[TinyTim:]

Auto Junkie-
Exactly right. No takers, just more noise from DC.

A vehicle has to get below 18mpg to qualify and the replacement has to be showroom new.
These are either big engine luxury cars or trucks

Jun 22 10:08 PM