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?
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