Skip to comments.Larry Kudlow: Why I Like the "Cash for Clunkers" Plan
Posted on 08/06/2009 6:16:57 AM PDT by SeekAndFind
As a free-market capitalist who does not believe in artificial spending and pump-priming from Uncle Sam, I'm going to eat a little crow with the following statement: At this moment in history, if we're going to use fiscal stimulus as Washington insists, I favor extending the cash-for-clunkers car-rebate program.
With the greatest respect for my conservative friends and colleagues who totally disagree with me, here's why.
In virtually no time, the clunker program has become a national pastime. It has captured the public's imagination in a way that no other federal stimulus has. Everyone is talking about it. And I truly believe that consumer spirits have been buoyed by the prospect of going out and buying a new car -- even with federal assistance, and even under the duress of federal mileage standards.
After a very dreary year or two, people might just have fun trading in their clunkers and buying something new.
Even today, as unfashionable as it sounds, and given Washington's attack on horsepower, Americans are still in love with automobiles. They still like going to showrooms, checking out the new models, inhaling the great new-car smell, and yes, kicking the tires and making a buy. Cars may no longer be the heart of our economy -- that's all techie, information gadgets now. But folks still love the car thing.
Now, I wouldn't want the government to pass out free money for everything. But in this particular case, the cash-for-clunkers rebate program is working. It's working so well that it's running way ahead of the computers that are administering it at the Transportation Department and Citibank.
Well, sure. That's government for you. But unlike most of the rest of the fiscal-stimulus plan, this program actually works because the federal cash rebate actually contributes to a consumer purchase. It's not just another welfare-type transfer program.
Incidentally, with all those people rushing into the car-dealer showrooms, the ones who cannot afford new cars are buying used cars. Used car prices are up substantially this year, a healthy sign for the entire auto business.
And carmakers are going to have to ramp-up production in order to meet the clunker trade-in demand, which could well mean better employment -- something we desperately need. Plus, in addition to fueling better job creation and higher incomes, this process may generate rising tax revenues from the sale of the cars.
And the price tag of the program is a mere $2 billion compared with the trillions of dollars Washington has been wasting. So, for once in our lives, Washington spending is giving us a good bang for the buck.
The biggest trade out there seems to be selling the Ford Explorer and buying the Ford Focus. Of the top-five-purchased higher-mileage cars that qualify, Toyota has three, the Corolla, Prius, and Camry. The Prius is made overseas, but the other two are manufactured mostly in the United States. The number-three trade, the Honda Civic, is made in Indiana, while the Dodge Caliber and Chevrolet Cobalt rank in the top ten.
Yes, as for the Chevy, it is a little bizarre that the government that owns General Motors is in effect paying itself. So it goes. It ain't perfect.
And yes, it's quite possible that government rebates today will steal car sales from next year. But let's cross that bridge next year when the bull market recovery will hopefully be stronger.
Right about now you're probably saying, "Well, why not just spend another $100 billion and give consumers checks for everything?" Or, "Why not spend another trillion?" Well, I don't want to go there. Just this one cash-for-clunker program -- that's all I want. Fund it again for a couple of billion dollars more.
I mean, look, if I had my way, that trillion-dollar stimulus plan from President Obama would have gone to a six- or twelve-month tax holiday for everyone. But alas, that's not how the political ball bounced. At least for the clunkers, there's a plan that has caught the public's imagination and makes for a reasonable amount of economic success.
So I invite my Republican friends in the Senate and my conservative friends everywhere to push for the clunkers.
Ralph Waldo Emerson once said, "A foolish consistency is the hobgoblin of little minds." So I acknowledge that I am not being consistent. But I do actually believe that the new bull market in stocks and the onset of economic recovery will both be helped by improved consumer spirits, better car sales, and maybe even a new job or two for the American workforce.
And now I will try to regroup and go back to being a pure free-market-capitalist supply-sider.
- Lawrence Kudlow is host of CNBC's The Kudlow Report and co-host of The Call. He is also a former Reagan economic advisor and a syndicated columnist. Visit his blog, Kudlow's Money Politics.
Larry’s officially lost it.
I expect better of Kudlow.
Just because cash for clunkers is better than the myriad other forms of government waste doesn’t stop it from being government waste.
What an idiot.
Uh, oh. Has Larry resumed his coke habit?
To those who agree with “Cash For Clunkers”, may I offer the words of Samuel Adams:
“If you love wealth more than liberty, the tranquility of servitude better than the animating contest of freedom, depart from us in peace. We ask not your counsel nor your arms. Crouch down and lick the hand that feeds you. May your chains rest lightly upon you and may posterity forget that you were our countrymen.
I like LK, but he is dead dead dead wrong.
Lots of things “feel good”, but they’re dreadfully dangerous.
C4C is EXACTLY one of those things.
What does anybody expect to happen when all these people realize they now have a new big car payment each month? Won’t something else suffer? I am pretty sure that money can’t be respent. The money going for the new car payment will necessitate buying less of something else.
It's not just another welfare-type transfer program.
Oh, yes it is a transfer program - from my taxpayer pocket to a car buyer. And its a total waste, as the engine is destroyed (as opposed to parting it out to stimulate other auto side industries).
If you want to stimulate the economy and bury the country in debt why not put the money in the hands of the American consumers.They are the people who stimulate the economy.There would be “NO” economy without the people to even speak of.The last people on earth that deserve a bailout are the people on wall street who sat behind their desk and robbed people/towns/cities and countries of their wealth from all over the world.That’s why the Asians call wall street “SUCKER STREET”.
What a steaming pile of totally unmitigated garbage:
Totally ignores the massive unintended consequences for used car and auto repair businesses. Totally ignores the unintended consequences for charities that are funded by selling donated used cars. Totally ignores that a LOT of the talk concerns how badly off the govt was with their cost estimates. Totally ignores that this is an example of govt picking winners, not the market, which is classic statism/fascism/marxism. Totally ignores that most clunkers are US made, which will hurt the US parts industry, while most new cars purchased under the program are foreign made (to the degree that the Big Three are really US manufacturers and Honda - with factories all over the US - is a foreign manufacturer, which is debateable.)
As I said, a steaming pile of totally unmitigated garbage.
It unfortunately shows just how out of touch he is, there in that NY-CT mogul corridor of his.
I find myself in the very uncomfortable position of being in the market for a new truck, as my current one’s transmission bit the dust and it’s just not worth sinking repair money into because the rest of the truck isn’t far behind.
And I want some of my &^%$!*> tax money back.
What to do... what to do...
And thanks to taking all these good used "clunkers" out of the market, we can expect them to go even higher, outpricing people's ability to own one.
Larry Kudlow should know better.
I agree. What a load of horse pucky. He must be high on something for him to ignore the secondary costs associated with this stupid C.A.S.H. program.
Kudlow can’t be this stupid. It’s bad enough he works for CNBC.
“As a free-market capitalist who does not believe in artificial spending..”
Yeah, you do believe in it. So please don’t label yourself as a free-market capitalist anymore. Ok?
Off the wagon. No doubt about it. Larry had better head straight for the nearest confession booth, and then find a 12-step meeting — fast!
And the price tag of the program is a mere $2 billion compared with the trillions of dollars Washington has been wasting...
Exactly how many cars were purchased for that $2 billion? How much government overhead per deal?
The biggest trade out there seems to be selling the Ford Explorer and buying the Ford Focus.
What happens to the Ford Explorer? Who owns it? How much to destroy it?
Now, I wouldn't want the government to pass out free money for everything. But in this particular case, the cash-for-clunkers rebate program is working...
So government intervention in the free market is good some of the time? Are you a Neo-Free Marketer Larry?
“What does anybody expect to happen when all these people realize they now have a new big car payment each month? “
No prob. BO will start the CCNCPRP, the Cash for Clunkers New Car Payment Relief Program.
I agree too. What part of Thou Shalt Not Steal doesn’t he understand? Why do so many people believe it is OK to steal if you use the government as an intermediary in the theft?
I’m an engineer at an auto supplier, just returned from a 12 week layoff due to ‘the Troubles.’ But I don’t want or need this kind of ‘help’. We are better off in the long run with just policies, not income redistribution/theft as an instrument of social/economic policy.
Yes, but the money being used on the program was being wasted anyway. I think I read that the infusion of the new 2 billion is coming from funds set aside for “renewable energy”, which means it was already being wasted. At least “cash for clunkers” helps stimulate some sales.
Larry never had it. He kisses the butt of whoever is in power.
“Cash for Clunkers” has proven to be a windfall for “foreign” car manufacturers, i.e., Toyota, Honda, Hyundai.
It is also “time-shifting” a lot of trades that would take place in the ordinary course of business over the next couple of years anyway. What is SEVERELY impacted is the now depleted supply of perfectly satisfactory vehicles in sound mechanical condition, that just happen to have only a mediocre fuel economy rating.
Fuel costs, even at $4-$5 per gallon, are still not the major expense of owning a car over its lifetime, depreciation and interest are. Even insurance costs more than the fuel on a yearly basis.
It's the oldest scam in Congress's playbook. The money taken out of the "renewable energy" budget will easily be replenished. The original scam is taking money out of the military budget, because it too is easily replenished.
Um...that's limited to those who actually HAVE a drivable "clunker" that they can trade in, AND have enough disposable income to pay the difference between $4500 and new car.
It torques off the rest of us who have to cough up our "fair share" of that $4500 so someone else can enjoy a new car.
I have a car in the driveway that gets just good enough mileage (allegedly, on the books) that it doesn't count, that's just the wrong side of drivable, and I will have to pour about $4500 into it just to make it road-legal - just so I can get it to the dealer as viable trade-in - and I have to pay for someone ELSE's $4500 "trade-in" on a perfectly drivable vehicle that I'd gladly pay $4500 to own? WTF?
Bullhockey! How many sales in previous months didn't take place because people were waiting for this? And how many future sales now won't take place because of it?
When the low income person decides to buy a used Explorer to haul her kids, will the price of those left have been raised exponentially? Will she be able to afford now scarce parts for her vehicle?
Kublow likes it that the taxpayer subsidizes a class of taxpayer, the one in possession of a clunker and willing to buy a new car. Why not just have a blind drawing of random taxpayers and give them $4,500. Oh no, that would be fair and rich people may get some. It is not like the original taxpayer could spend his money better, he needs government to.
A business owner I know traded in the old GM company truck for a new Ford under the C4C. The opinion was that he was getting a roundabout tax rebate as he'd certainly paid considerably more than that $4,500 in taxes.
While I disagree with the program wholeheartedly, I can't really find a flaw in that particular argument for those who really do pay a lot in taxes.
I like it because it shows these people can’t even correctly budget a stupid motor vehicle rebate program. Which means that it just might be a bad idea to let them run the health-care industry. At least when they mess up the clunkers budget, nobody dies.
As government programs go this is not one of the worst. But what is more important is that this takes the focus off something truly important which is the monstrosity called the health bill.
There is no more important subject before the American people. Either this bill is defeated or America goes down in flames. If this bill is defeated, Obama will be leaving the WH in 2013 to return home to Chicago. That is the whole ball game. Don’t waste energy on the car business. Anyone here would avail themselves of it if they actually needed a new car and qualified. So let’s not be hypocritical. The health bill — well that’s another matter. That’s our very freedom at stake.
Give away free money and the people will come!! Hey stand on the corner and hand out free 20 dollar bills and see if a line doesn’t develop!! But don’t be taking those twenties from my pocket!!
He likes it because he’s a thief. All thieves like taking somebody elses money.
I thought he was speaking sarcastically, tongue firmly in cheek. But I can’t tell for sure as I have NEVER watched him. Is he serious?
“But unlike most of the rest of the fiscal-stimulus plan, this program actually works because the federal cash rebate actually contributes to a consumer purchase. It’s not just another welfare-type transfer program.”
I have mixed feelings about C4C. As a matter of principle I’m against it, I just don’t think it’s as bad as some of the other stimulus ideas. For about the past year now, most of these stimulus programs, health care reform proposals, etc. have involved figures in the hundreds of billions and even into the trillions. I’m somewhat relieved that here’s a program (even if it’s a bad program) where the proponents and opponents are arguing about figures in the low billions; to a certain extent, this keeps them occupied when they would rather be devoting their time to continuing their spending rampage on higher dollar, more harmful programs. Also, if they would only spend a lot of time arguing about a few other programs in the low billions, maybe more of them would start believing that a billion dollars is a lot of money, instead of acting like it’s monopoly money.
Before you flame me, you have to understand that I’m looking at this from a common sense point of view; my wife really likes to spend money; and even though I would rather that she saved, I figure that if I can’t stop her, and she’s going to spend money anyway, I would rather she spent a Saturday afternoon at garage sales (losses of 50$ to 100$) than at a shopping mall (possible losses of several hundred dollars).
Yes, and a nationalized healthcare plan that only encourages euthanasia for those over 65 is better than one that encourages it for Republicans of any age, so why don’t we get behind that while the going’s good?
In fact, let’s follow the lead of the drug companies and make a secret deal with the administration that they not come after any Republicans under age 65!
***Oops, sorry, message above intended for Texan Tory***
wait until all those happy driving sheeple cannot afford the six dollar a gallon Obama gas in a few months....
“Yes, and a nationalized healthcare plan that only encourages euthanasia for those over 65 is better than one that encourages it for Republicans of any age, so why dont we get behind that while the goings good?
In fact, lets follow the lead of the drug companies and make a secret deal with the administration that they not come after any Republicans under age 65!”
Hold on there, I never said anything about getting behind the cash for clunkers program, I’m simply expressing some relief that they are spending time working on a program in the low billions instead one that’s in the hundreds of billions. Just about everything this administration and congress have done is harmful, and they are quite eager to continue on their path of destructive behavior; I don’t expect their behavior to improve, so I’m glad when their attention is diverted by matters that are relatively small so that they are not doing greater damage elsewhere.
Without a corresponding reduction in government spending, a tax rebate is irresponsible and increases the burden on our grandchildren to pay the money back.
If your friend was going to make the trade anyway, then it makes sense for him. It makes little sense for the government to be coercing people with money to make purchases that they otherwise would avoid. It must displace other more sensible transactions.
C4C will pump the 2nd half economic numbers for Baraq and the Dems.
That’s what it’s all about.
And 40% or so of the sales are going to companies with his UAW buddies which helps them a bit. Baraq needs to keep Government Motors and Fiat alive until Nov 2012.
Does Fannie Mae or Freddie Mack ring a bell? The dims FORCED banks to loan money to home buyers who could not afford the homes, and taxpayers were forced to bail them out. This will be another guvmint bailout.
I like clunkers.
The pool of future used cars is being depleted.
It is madness to destroy a functioning automobile, junking it, salvaging no parts or components and simply selling the scrap to China.
Anyway, if you can afford new car payments, why the hell do you need a handout?
How many of the people who would be eligible for the program and can really afford a new car would be inclined to drive a real "clunker"? The purpose of the program is to destroy cars that should be replacing real clunkers. Though I wouldn't be surprised if the fact that many people will buy new cars who shouldn't be doing so will be treated as an advantage as well.