CovOps
 Location : Ether-Sphere
Job/hobbies : Irrationality Exterminator
Humor : Über Serious
 |  Subject: Statists' Scam All Clunkered Out; The dealers may, or may not, get their money  Mon Aug 24, 2009 7:48 am | |
| The Transportation Department is ending its "cash for clunkers" program today, but the deadline shouldn't pass without recording a few economic and political lessons. To wit, the feds can't even give away money very well.
The $3 billion plan is being hailed in Washington as a great success because so many Americans sought to get a $3,500 to $4,500 check financed by other taxpayers in return for trading in their old car. Transportation Secretary Ray LaHood boasts that the program has been wildly popular and provided "a lifeline to the automobile industry, jump starting a major sector of the economy and putting people back to work.'' But it's hardly miraculous that some Americans would be willing to apply for "free" money to do what they probably would have done eventually anyway.
Meanwhile, the program has proven to be an administrative fiasco, as the central planners at Transportation vastly underestimated how many people would apply, assigned too few people to process applications, and had to scramble to borrow workers from the likes of the Federal Aviation Administration to process claims. Auto dealers have nonetheless told of having to front the money to car buyers as they wait and wait for Uncle Sam to get around to paying them.
The Milwaukee Journal Sentinel quoted Brad Schlossmann last week as saying that he had received "no payment whatsoever" on 120 clunker deals at his Milwaukee Honda dealership. Russ Darrow, who owns 15 Wisconsin dealerships, reported having done 400 or so clunker deals and been paid only for a few of them. That story has been repeated from coast to coast. And now that the program is ending in a rush, things could get worse. As buyers sprint to meet the deadline, dealers can't be sure they'll get their paperwork in before the $3 billion runs out. Some dealers, and even the likes of General Motors, could have to write off clunker credits if they aren't reimbursed.
"We do not know how many deals are in the pipeline. We don't know how many dollars are left in the program at this very moment," Ted Smith, president of the Florida Automobile Dealers Association, told the Associated Press this weekend. "That's fundamental to the health of the dealerships that are participating. If you run out of money before you run out of deals, that's not a good situation." Welcome to the vagaries of politically motivated—and subsidized—sales. The politicians care mainly about getting credit for the giveaway, not if some hapless dealers are left holding worthless paper when the money runs out.
As for helping the auto industry, the proof will be whether Mr. LaHood's jump start to sales is sustainable. The idea that a temporary subsidy program will launch the auto industry onto some new, higher sales and production plane defies logic. More likely, the program will merely have concentrated sales over a shorter period, as buyers either postponed purchases once they learned the program was in the works, or accelerated them to meet the subsidy deadline. The program is another bow to the now-reigning Washington policy illusion that the key to prosperity is force-feeding consumer spending, rather than creating incentives for Americans to invest and take risks.
We keep hearing this is a brave new era of public confidence in the virtues of government planning. But the lesson of cash for clunkers is that if this government can't manage a free lunch, it can hardly be trusted to decide whether you can have a hip replacement, and how much it will pay for it.
http://online.wsj.com/article/SB10001424052970204884404574366664026140786.html?mod=googlenews_wsj |
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