Cash for Clunkers: A Cautionary Tale for Healthcare Reform

“Cash for clunkers” is a great example why the government is not capable of running the health care system. The clunker program offers up to $4500 for your low gas mileage, less-than-25-year-old car.

When you trade in your gas-guzzler the dealer advances the $4500 credit, destroys the car, and bills the government. This is where the wheels come off the program. One dealer said it took five hours to fill out the paperwork for one clunker. Truth number one: Government runs on paperwork. So much for streamlining health care claims processing, and squeezing all those legendary “inefficiencies” out of the claims process.

The “cash for clunkers” program was funded with $1 billion and projected to run until November 1. After one week, they are out of money. This teaches us that the government has no idea what anything is going to cost; they guess.

The “cash for clunkers” program was designed to take gas-guzzlers off the road and replace them with fuel-efficient cars that would help reduce gasoline consumption. The problem was that most of the fuel-efficient cars are built by foreign manufacturers.

The biggest winners will be foreign manufacturers. Same with national health care. Chronically uninsured American Citizens count about 9 million, less than 3.3% of U.S. population. The uninsured rate for illegal aliens is almost the reverse. According to the Pew Hispanic Center, illegal aliens counted 11.9 million in October 2008.

The primary purpose of “cash for clunkers” was fuel mileage. The truth is, not really. You can qualify for a rebate by trading in a pickup that gets 17 miles per gallon for a car that gets 21 miles per gallon. That is going to make all the difference in the world. If you want a Crown Victoria, it automatically qualifies you for $4500, plus, your kids won’t ride with you anymore.

If you would like more information, here is the government website, “Cash for Clunkers.”

One last observation on the “cash for clunkers” program. What economist believes destroying property is a good thing? Every “clunker” traded in has to be destroyed. Removing products from the market while they still have economic life destroys value, thus a drag on the economy. This program is counter-productive. We borrow money to destroy value! If this made sense, why didn’t we level every foreclosed home in the U.S.?

Disclosure: No Position

Comments

[joebaggadonuts:]

Trillions to save "banks" and banksters, but _not_ three billion for the unwashed masses, and the planet we share with them. Dalt, you are a skinflint that would make the pre-reformed old Ebeneezer Schrooge proud.

Aug 02 10:26 AM

[xtimgx:]

I like the ideas you had but I think you are far too one sided on the argument. You fail to provide good reasons on both sides of the argument and skew your article with falacies. The last paragraph may have been the worst. I like the concept of the article but please think more about it before you publish a story and try to stay objective. Thank you.

Aug 02 10:41 AM

[User 464866:]

another way to look at your article is that John Dalt can not write an accurate or fact based article.........the clunker in this case is his story.

Aug 02 10:48 AM

[medsearch:]

The government seems to mess up up everything they get their hands on. Trouble is, we can not afford to let them mess up health care....the ramifications will be devastating.

One thing that nobody wants to admit about Obamacare is that it will cost this nation thousands of high-paying jobs. In my industry, medical sales, we have already seen the loss of 20,000 medical device sales jobs and pharmaceutical sales jobs in anticipation of reform

Aug 02 10:52 AM

[arkie3:]

Your argument falls on the deaf ears of Keynesian public schoolers. You are not being a good little cog Mr. Dalt.

Aug 02 10:57 AM

[Fileunderi:]

There are two problems that I see with those that comment here in support of the CARS program.

1. You know nothing about the automobile business. This program, like all new and "innovative" buying incentives, is doing nothing more than stealing future business. Once this program ends, and it will end, sales numbers will drop back down to 9 million annualized. Maybe less. Credit is still tight, and the economy is still bad. A few hundred thousand auto sales stolen from next year is not going to change that.

Another "outstanding benefit" from this program is that it disrupts the natural flow of an automobile's useful life. Where do you think these hundreds of thousands of clunkers would end up if they weren't destroyed? In the hands of those that are poor or lower middle class (what's left of them). The end result will be much higher prices in the "clunker market", and many of those who cannot afford anything but a vehicle near the end of it's life will not be able to own transportation.

2. You can't decide what this program is about, selling more cars or decreasing dependence on foreign oil. If you want to decrease this dependency, you increase CAFE requirements. It doesnt cost the taxpayer anything. Of course, it doesn't buy votes either, does it?

Aug 02 11:25 AM

[nomoney NM:]

medsearch
How about the millions of jobs lost in manufacturing because we can't compete with countries that have socialized healthcare, having lost a few jobs to Germany,France my pity is best placed eleswhere


On Aug 02 10:52 AM medsearch wrote:

> The government seems to mess up up everything they get their hands
> on. Trouble is, we can not afford to let them mess up health care....the
> ramifications will be devastating.
>
> One thing that nobody wants to admit about Obamacare is that it will
> cost this nation thousands of high-paying jobs. In my industry,
> medical sales, we have already seen the loss of 20,000 medical device
> sales jobs and pharmaceutical sales jobs in anticipation of reform

Aug 02 11:44 AM

[hmp49:]

Most of the purchasers are people with high credit scores, who could easily have replaced the cars if they wanted/needed to.

And a lot of those are people with 3-5 cars in their driveways, they'll just trade in the oldest car and all the kids get bumped up one car. Free money, it's no surprise the people who can afford it jumped all over it. But the single mother with the broken jalopy who can;t afford a new car gets no help replacing it with a high mileage dependable used car.

An extra $1000 is not going to get you to purchase a Prius if you want a pickup truck. You'll just trade in your pickup truck for one with mileage that;s 2 mpg better. Whoopie.

As for "all the new insurance" you had to have insurance on the car for one year previously (my best friend has 8 cars in his driveway, but the one he really wanted to replace didn;t have insurance on it). SO THE PROGRAM DOES NOT PRODUCE A SINGLE NEW INSURANCE CONTRACT.

Nice try.


On Aug 02 07:07 AM User 464793 wrote:

> Nice try. The actual deal was trade in your old car and if it got
> 2-3 miles better mileage you got $3500, should it manage 10 mpg then
> you get the $4500.
> This is what you call a huge success, no matter how hard you try
> to slant it. they thought it would last until Sept.- Oct. It lasted
> two days at the dealer I went to.
> Those 250,000 new cars mean manufacturers have to make more cars.
> Insurance companies get new business, loan companies get new loans,
> and people working for the auto manufacturers get a little breathing
> room.
> Lastly, I went to a Chevy dealer. I think if you did a little actual
> research you might find that a high percentage of new vehicles purchased
> were Made in America.

Aug 02 03:05 PM

[RAJS:]

I thought CARS program is intended to reduce imported oil use. Seems like it is giving incentive to keep using oil. Yes it may reduce some oil use but would it make any dent. The $1 Billion (or now $3B) would have been more useful for research on alternate fuel system. But that would have taken time. So the congress is propping some markets or keeping campaign promises.

About health care:
If the US can not reduce doctor or hospital bills to Medicare how they can be effective on a larger scale?

Aug 02 03:56 PM

[CanadianInv...:]

People who claim that countries with Medicare competing for manufacturing jobs have an advantage should take a longer term view....all these countries have high (and growing) debt to GDP levels....they will be broke sooner than later funding these programs....or face drastic cuts. Growing up in the birthplace of Medicare I have seen cuts to services through the years, the growing taxes and ever growing debt to support it, the growing wait times, shortages of doctors and nurses, and now the warning signs coming from people who were ounce supporters!

No country has yet found an affordable and sustainable system of Medicare, even though they all put there own spin on it. I guess Obama and the democrats have a secret recipe for Medicare that no one else has ever thought of....they will be the saviors of Medicare worldwide....LOL!

Aug 02 05:25 PM

[Walking Turtle:]

So when my body really starts falling apart and making poor with the fuel mileage, maybe by then with Stem Cell Resarch and modern electronix going as they are these days we'd all be able to maybe sign on for a Corporeal Consciousness Trade-in Transplant at a cash discount, iffen (but ONLY iffen) we got the Right Health Insurance Package...?

That'd be good for military officers, the Executive Branch, many Congresscritters and all of Osama Bin-L's intel-pwned palz, one supposes. But does America need such "coverage" as that? I think not.

Two things America needs: Re-establish the gutted-out manufacturing base (makes for jobs) and Universal SINGLE-payer Health Insurance for every workin' stiff on USA soil (which makes for healthy jobkeepers). If this $-for-clunkers program should indeed be truthfully found to have contributed to consumer orders for new cars made Stateside, that is very good indeed for America imho. If so, then I'll only complain re the ongoing and imvho STUPID choice of the Internal Combustion Engine as the Power Plant of Irrational Choice.

IF combustion THEN at low pressure. Light STEAM boilers suitable for road use are not so farfetched; they run on propane...

Even fuelling the Prius hybrid on propane'd be an improvement in the tailpipe department; having previously owned and operated a propane-powered light truck for many years I am quite rationally certain of this being so.

That all having been said, so help me, I found my own Third Nostril a-twitchin' and the ol' Red Flag racing up the ol' Sophistry Alert Pole by the fourth or fifth paragraph.

As for borrowing money to destroy value: That is how it works with a private fiat-currency house such as the Fed calling all the major policyt shots in the field. I for one am relieved to know that pig's lease expoires in December of 2012. Were the currency redeemable in hard bullion, certainlty th3e C4C program'd have been scaled to somewhat more modest amounts.

Just like everything else. After all, an ounce of gold still would buy a really decent silk business suit in Hong Kong's tailoring district, last time Iooked.

Aug 02 06:02 PM

[Leftfield:]

The healthcare plan will increase abortions, decrease any choice of methods outside the government template for, say, cancer treatment, ration that, impose euthanasia on the elderly and mandate sex-change coverage. I'm betting on it.
The government may learn from cash for clunkers an easy way to dispose of the elderly. Don't bet against it.

Aug 02 09:08 PM

[http://www....:]

Program runs through Nov 1, 2009 or when the funds are exhausted, whichever comes first.

Jhenry
Blogger
cashforclunkersfacts.info
www.cashforclunkersfac...

Aug 03 07:37 AM

[MarkitWacha:]

You're not accounting for the energy it took to melt and forget all the steel components in a vehicle. Additionally, there is a huge transportation cost and organizational cost to each component in a vehicle.

Count it in BTUs. Then consider that they came from a non-renewable resource-oil. Then consider that those vehicles could be easily converted to run on natural gas or ethanol. Cash for clunkers is ridiculous.

If I paid $4500 can I dislodge a member of Congress of my choosing? I'll call it the 'Cash for Kooks' program.

On Aug 02 09:11 AM CaseyVR6 wrote:

> This is a thin pull from the Clunkers program to Healthcare to start,
> but to try to say the program is a complete failure is ill informed.
> First, there is little that qualifies cars as being "American" or
> "Foreign" except where the executives sleep. Toyota, for example,
> manufactures most of it's cars (from top to bottom) in the US whereas
> Chevy only partially assembles their cars domestically. Secondly,
> the cost of crude and all products made from it is felt everywhere.
> Heating a home to baking and delivering a loaf of bread. Using less
> on inefficient vehicles (say 250,000 of them) pulls our usage down
> by huge numbers. Not enough on it's own but a very good start.
> Energy independence is nothing to brush aside. Lastly, banking rules
> are far different than they were a few months or years ago when foreclosures
> were an uncontrollable plains fire. It is more difficult to get
> a loan and banks are no longer selling their bad debt to other banks.
> If you can't afford the car, you will have an extremely difficult
> time winding up with it.

Aug 03 11:45 AM

[User 433379:]

Quote: "This program is counter-productive. We borrow money to destroy value! If this made sense, why didn’t we level every foreclosed home in the U.S.?"


Well said. Although not an apples to apples comparison, since many foreclosed homes are modern, efficient homes. How about lets level every OLD foreclosure where the home has inefficient or non-green workings (old furnaces, plumbing, windows, insulation, doors, etc.). The government can pay them double the homes market value if they go out and buy a green home. Then the government can destroy the old homes completely and bill the taxpayer for it.

Funny thing is that if I woke up to headlines "Cash for Dumpers - Home Edition", I wouldn't even flinch.

Aug 03 12:12 PM

[Whitslack:]

"If this made sense, why didn’t we level every foreclosed home in the U.S.?"

Just wait. I'm sure this is on the horizon. They will spin it by saying there's too much supply and giving this destruction of property a sound-bite-friendly name like "thinning the herd." Then they'll tout how good it is, since it puts contractors and homebuilders back to work. Never mind that destruction of valuable property is always a net negative.

Aug 03 12:15 PM

[Doc 224899:]

Somehow I sense a kindred spirit in you, John Dalt, and it was clever of you to ferret out the 5 hours of paperwork it takes to bring every clunker to the crusher. You are absolutely correct that government health care will be every bit as inefficient. In fact, once government gets ahold of healthcare, dealing with "the insurance company" will be every bit as frustrating as dealing with the IRS.

At least my health insurance company recognizes when they've been wrong, if I hang in and get my facts straight and keep on talking to them until I find somebody with a brain to talk to. I've never found the IRS to acknowledge they've been wrong. Social Security is pretty much the same way. We can expect government run health insurance to be very IRS-like.

Aug 03 06:33 PM

[Mad Hedge F...:]

injm So now we have euthanasia for cars. The Wall Street Journal tells us that a government condition of the Cash for Clunkers program (see my last report at www.madhedgefundtrader... ) is that clunker buyers total the engines by pouring sodium silica into them. That way they can’t be resurrected like Frankenstein at the junkyard. What’s next? Free Viagra for the high mileage, new car buyers? There’s a certain poetic resonance there. Anything that works. In the meantime, the Republican Party is slashing its wrists by trying to block an expansion of the program. Is Mc Cain trying to lose the election a second time? I think he is oblivious of the warm and fuzzy feelings the program is generating, which is far more valuable than any direct economic impact. Don’t they have Ford dealers in Arizona? I never thought I’d run a car company chart again, but here is Ford in all its glory, up a mind boggling 65% since Cash for Clunkers started. Like virginity, confidence is very hard to recover, once it is lost.

Aug 04 05:33 PM

[KYConserv:]

And Medicare is broke/broken. Not a good analogy to make your point. The government cannot run Medicare, it can't run CFC, and universal healthcare will be a disaster.


On Aug 02 09:06 AM electronichobbit wrote:

> Why not mention that the insurance companies skim off 30% while the
> administrative costs for medicare are only 3%. your argument is specious

Aug 04 05:41 PM

[Papasmurf:]

C4C is just another wealth transfer program that takes from those who need and give to those who already have too much.

Aug 24 11:34 PM