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.
“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***
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