Sunday, August 02, 2009

Clunker program hurts the poor and unemployed

I can't believe that some people think it is a good idea for the government to pay people to destroy things of value. Are you in the habit of taking valuable durable goods that could be easily sold on Craigs List and ruining them?

That is what the federal government is doing with the nation's fleet of used cars.

Imagine if the government bought Maytag, and then announced a program in which you could buy a new Maytag at a reduced price if you destroyed your current one? That's basically the "Cash for Clunkers" program. It is idiotic.

You know what one of the biggest obstacles for the chronically unemployed? John Charles at the Cascade Policy Institute has done a lot of research into this question. The answer is: reliable transportation.

It makes sense. You have to be able to get to a job to have a job. Lots of jobs aren't near enough public transportation to make that feasible. Lots of poor people can't afford to buy a car. So their job prospects are extremely limited.

Charles' research showed that if you provide these folks with a reliable automobile, they can get a job and keep it.

So with unemployment approaching 10% in this great economy, what do we do? Take perfectly funcionable cars permanently off the road, and give the middle class a big subsidy to upgrade to a newer more expensive car.

Great idea. It increases the average cost of the nation's fleet of cars, putting further out of reach that which the poor need to be gainfully employed. It removes from the market millions of low cost cars, which they could otherwise someday perhaps purchase.

All in the name of marginal increases in fuel economy. Screw the poor. Great idea.


Charley B said...

Rob, This is nothing more than government once again enabling a failed industry stay afloat. It creates a number of new problems, not the least of which is the increased lag time it will now take truely unsuccesfull businesses to actually fail.

Band-aid approaches never work. Like giving money to a drug user the help will soon dissappear, and not solve any of the long term problems. Not to mention in many respects adding greater difficulty to the existing problem at hand.

MAX Redline said...

Charles' research showed that if you provide these folks with a reliable automobile, they can get a job and keep it.

That was then. Today, you Go By Streetcar!

MAX Redline said...

Off-topic, apologies. However, I just stumbled upon something that you may find of interest. How's installing 24-hour CCTV systems inside private homes "to ensure that children attend school, go to bed on time and eat proper meals." grab you?

R Hall said...

Lets start out with the most obvious fact - this program is entirely voluntary. No one is requiring the poor, or chronically unemployed, to turn in their clunker for a new car. If they are not being required to trade in their "reliable" clunker, how are they being harmed?

That brings me to a second point, my girlfriend is a social worker and works with both the poor and chronically unemployed so I asked her what, as an estimate, how many of the folks she works with have a reliable car. She estimated 5 to 10 percent. The poor, and never mind the chronically unemployed, are much less likely to have a reliable car, right? They probably can't afford to fix the car, and as cars get older, it's usually the big things that start going wrong - which are, of course, more expensive.

Most of the poor (and I'll refer to the poor and chronically unemployed as "the poor" since I'm to lazy to keep typing out both) live in urban areas. While lots of jobs can't be accessed by mass transit, I'll bet the vast majority can be. The poor in rural areas obviously need reliable transportation that isn't mass transit. However, this current program simply does not hurt them since, if their car is reliable, then why would they turn it in and incur more debt and payment obligations?

rural resident said...

R Hall ...

Many of the cars that are being turned in to get the "clunker credit" are still perfectly reliable; they're older and they get fewer miles per gallon. Instead of junking them, why not re-route them to those who need a (at least semi-) reliable car? It might be that many of these cars would actually be upgrades for those driving very old or very unreliable cars.

Anonymous said...

Mark my words...

1 to 1.5 years people are not going to be making the payments one some (not all) but some of these cars....

Are we going to have a car payment bailout????

This is a joke of a program and will do more harm in the long run then any good in the short run. But then....the more I find out about BHobama and his Chicago cohorts ...they dont teach economics at any of the schools these communists went to.

R Hall said...

Rural Resident: Now there is a good idea, and certainly worth looking in to .. however, the premise that the program hurts the poor is faulty. And that was the central theme of Rob's post.

Rob Kremer said...

R Hall writes:

If they are not being required to trade in their "reliable" clunker, how are they being harmed?

I think you have missed my point about how the poor are made worse off by this program. It is NOT because they are being required to turn in their clunkers.

It is because the program destroys a good portion of the nation's stock of low-value vehicles that will drive up the price for a working poor person who might need to buy a low value car to get to a job.

Anonymous said...

Good portion?

How many used cars are in America?

How many will eventually be traded in under this program, and how many of those are "dead" already?

While I don't have the hard numbers and I welcome somebody that does to share the numbers, I bet the percentage is relatively small.

Also, if that percentage is small, then what real impact is this having on the used car market?

Because that's what Rob is asserting: The used car market will tighten, prices will go up and less poor people will be able to afford a car.

(Rob's argument about increasing poor folks' income because they own a car is sound.)

But I bet you the numbers as a percentage and the prices in the used car lots and in Craig's list are barely effected, if at all.

So, what's this whining about?

It's ideological preening, that's all -- unless Rob has some numbers to back it up.

In fact, this likely is the most effective stimulus action in the bunch -- most spending hasn't taken effect and the evidence of effectiveness is marginal.

I'll admit I wasn't particularly excited about "stimulus" programs, but if we are going to do it -- this seems like the most "bang for the buck" in a mostly pork barrel binge, that has don't much.

Yes, it's populist and sure it helps the middle class more than the poor, but hey, business has been getting these kind of breaks in the form of tax appreciation allowances for years -- and Conservatives were as quiet as church mice -- they probably supported most of them, too.

Yes, I want to help the U.S. auto companies -- kicking them to the curb is shortsighted in my opinion. And it actually has created some excitement and stimulated some business. (Heard those radio ads that pay the bills?)

I think most of this is about not wanting to give any credit to stimulus type programs under Obama's watch, rather than about ideological purity or hurting the poor (both reasons are weak in my opinion).

Instead of being complete naysayers, which undercuts the arguments against the worst of Obama, like ObamaCare, pick your fights and then come out swinging.

Allow some populism into your thinking and figure out how to get the middle class and working class voting Republican.

That's how you win elections.

Nothing but naysaying doesn't win elections.

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