Coyote Blog

One of the reasons GM entered bankrupcy was that its slow and ponderous beauracracy couldn't handle the pace of the modern marketplace.  But one thing even than beauracracy could do was produce dealer rebate checks in a timely manner.  When many of your dealers are running on only a thin cash flow margin, even GM knew it was important to get rebate checks to dealers quickly.

So it is a bad sign that the government, who wants to run the auto industry, the banking industry and soon the health care industry, can't seem to process checks in a timely manner:

Some New Mexico auto dealers have backed out of the cash-for-clunkers program and more may do so as the federal government takes its time providing cash reimbursements.

Dealers across the state are owed more than $3.6 million, according to a dealers' group which says that so far Uncle Sam has only written three checks totaling about $14,000....

Dealerships put up the cash for the rebates after being told by the Obama administration they would be paid back within 10 days of the sale.

And here:

Hundreds of auto dealers in the New York area have withdrawn from the government's Cash for Clunkers program, citing delays in getting reimbursed by the government, a dealership group said Wednesday.The Greater New York Automobile Dealers Association, which represents dealerships in the New York metro area, said about half its 425 members have left the program because they cannot afford to offer more rebates. They're also worried about getting repaid....

Schienberg said the group's dealers have been repaid for only about 2 percent of the clunkers deals they've made so far.

Many dealers have said they are worried they won't get repaid at all, while others have waited so long to get reimburse

The problems cited in other analyses are two that I see all the time in dealing with the government:

1. Obsession with minute paperwork errors, and rejection of applications for the smallest errors.  For a variety of reasons, government clerks in this kind of program seldom have the knowledge, the incentives, or even the ability to parse between errors and omissions that matter and errors and omissions that are irrelevant.   In fact, if the same application comes back 5 times, that's just more job security.  I have discussed this a number of times, as state liquor license boards have rejected our applications repeatedly for ridiculously small, meaningless errors (here and here, for example)

   Here is my prediction:  You will soon see someone inside the government blaming the dealers, saying it is all because they are not following the 300-page process correctly or not filling out the forms correctly.

2. Absolute unwillingness to write a check.  Some of you know that I am in the odd position of being a libertarian who does a lot of business with the government, a result of my effort to privatize the operation of public recreation.  I am in the position of sometimes paying the government money (I typically don't get paid to operate a facility, I operate it for profit and pay the government a rent or concession fee) and sometime in the position of getting paid.  The government always demands all of its money owed to it well in advance (think of withholding, where you pay the government your taxes months before the true April 15 deadline).  The government only pays in arrears, and sometimes well in arrears.  Last winter, my funding troubles (when my bank holding my line of credit went bust) were aggravated by the fact that the government took 15 months to pay us $175,000 they owed us, at the same time it demanded an additional $500,000 in advance rent payments on the next year.

By the way, since every post related to the government this month must be related to health care in some way, what they government is doing on cash for clunkers is highly related to the difference in overhead costs between Medicare and private insurance companies.

The cash for clunkers processing is taking a long time in part because the government is worried about fraud and wants to make sure every car it pays out on was really qualifying and destroyed properly.  This takes time and manpower and overhead.  But this is exactly what private medical insurance companies spend their overhead on -- making sure that claims are real and justified and are not padded.  Medicare has lower overhead costs, in part because of government accounting hides some overhead, but in part because Medicare does not do any due diligence before it cuts a check.  It gets a form, it sends out a check.  It does little checking to see if the claim is real.