Editorializing in the News Section

The AZ Republic is at it again, cheer-leading any program that spends more taxpayer money, even to the extent of blatant editorializing in a news article.  From an article on cash for clunkers (emphasis added):

The program leveraged $3 billion in clunker rebates into $20 billion-plus in new-car sales. That far exceeded the initial goals for what is arguably the most successful of the government's recent economic-stimulus programs.

Here are the sum total of the sources quoted to reach this conclusion:

  • Scott Gruwell, general-sales manager of Courtesy Chevrolet in Phoenix
  • U.S. Transportation Secretary Ray LaHood
  • Bobbi Sparrow, president of the Arizona Automobile Dealers Association
  • Arizona MVD spokesman

So lets see -- the article quoted three groups that receive money from the program plus the administrator of the program.  Can't get more balanced than that.  I am not really good with the pithy 200-word letter to the editor, but I sent this in today:

Max Jarman and Betty Beard wrote that the cash for clunkers program "is arguably the most successful of the government's recent economic-stimulus programs."  Admittedly this is a low bar, but what evidence do they have of "success?"

Car buyers, they argue, really like the program.  Edmunds.com estimates that the government has been paying $3500 to $4500 for vehicles that have a blue book value averaging just under $1500 each.  Of course participants are happy "“ the government is effectively buying dollar bills for three dollars each!  But is this really a reasonable way to spend taxpayer money?

Car dealers also seem to be ecstatic about the program.  I would be too if the government gave my customers $3 billion of other people's money to buy products from my business.  But why are auto dealers more worthy of such largess than appliance dealers, or home builders, or even massage therapists?

Not mentioned in the article are the other 99% of car owners and business that did not participate in the program.  Unseen and unspoken for are the businesses and individuals who are $3 billion poorer because the government has chosen to divert this money to a more politically-favored industry.


  1. Jody:

    Oh I think it is the most successful stimulus program of the current batch. But -3 > -5 too.

  2. Dunque:

    There's also the law of unanticipated consequences impact to consider. I've read reports indicating that because these cars traded in are destroyed, the supply of used cars and used auto parts will shrink and, as supply and demand laws dictate, prices will go up. Way to help out the typical used car/used part buyer - who we all know fits the profile of the type of people government loves to "help."

  3. stan:

    We are destroying wealth in the form of automobiles and borrowing money from foreign governments to pay for the destruction. If liberals consider this a successful US govt program, they must think 9/11 was even "better" for the US economy because we didn't have to pay the terrorists.

  4. Dan:

    Stan - that's an interesting point about the 9/11 terrorists. I remember reading somewhere that the entire operation cost well under $1 million. Talk about bang for the buck. Imagine how much the U.S. govt. would have had to pay if it had decided to destroy those two buildings. (of course, it probably wouldn't have flown fully-loaded jet planes into fully-occupied towers, despite what some conspiracy theorists may say).

    I'm certainly against terrorism and utterly condemn the events of 9/11. But I do have to hand it to the terrorists for being very thrifty.

  5. Ron H.:

    Let's see, what could be wrong with this program?

    As mentioned in previous comments this program hurts the poor by reducing the supply of used cars and used car parts available, thus raising their prices.

    Also hurt are retail tire stores, auto parts stores, and auto repair shops as these new cars won't need service or parts anytime soon, and if they do, it will probably be warranty work at the dealers.

    The auto dealers aren't really helped in the long run, as the people who buy cars now won't be buying them in the future, so sales will now be lower for some period of time than they would have been without this program.

    I don't believe manufacturers are gearing up for higher demand by opening plants or hiring more workers because they realize, as we all should, that this is just a small bubble in the demand for new cars, to be followed by an equal sized slump.

    As to 'leveraging' $3bn into $20bn, we should ask where the money to buy these new cars came from. Much of it is likely borrowed. I thought that one of the main causes of the recent housing market bubble and current recession was over-extension of credit. If so, how is it helpful to borrow still more money?

  6. Rick C:

    "The auto dealers aren’t really helped in the long run, as the people who buy cars now won’t be buying them in the future, so sales will now be lower for some period of time than they would have been without this program."

    What? You mean the comments on the radio about how hopefully the program will jump-start car purchases are just wishful thinking?

  7. Elliot:

    I'm not the most religious of peple by any stretch, but as far as I'm concerned destoying a car, or anything else, just to make sure it is out of the loop is a sin. I'm used to driving used cars until they are dust. Any plan that "puts down" a car to "make up the (imaginary)balance" is just sick.

    The exception might be nuclear armements as part of some treaty but really. Even then I'd be whispering "Wanna see what this baby can do?"


  8. feeblemind:

    I believe Karl Denninger had a post up stating that the $4500 is taxable income. If I read it correctly, it means there is more sales tax to pay as sales tax is usually calculated on the new car price after trade-in value is deducted. No trade-in here.You are 'selling' your car for the $4500. So $4500 minus taxes minus increased sales tax minus car's trade-in value may turn out to be just a marginal deal for many buyers.

  9. Thom Moses:

    And now.... another rebate. The fed will let you claim the sales tax on tax return. Even the extra tax you had to pay because you sold your car to the gov instead of the dealer which would have reduced your tax.

    Now the dealers inventories are thin....you think they could have recycled a few of those "clunkers" for the used car lot?

    "even the little dogs eat the crumbs that fall from their masters' table" Matthew .... unless your masters name is Obama....no crumbs for the dogs

  10. Michael:

    I heard from a number of dealer groups that much of their customers were from the newly empty nesters. Edmunds lists of what was traded in and what was bought would seem to bear this out. I think a lot of money was spent to get people to buy cars who were going to buy cars. It will be interesting to see how this program affects the 4 quarter retail numbers.

  11. markm:

    "What? You mean the comments on the radio about how hopefully the program will jump-start car purchases are just wishful thinking?"

    It will work just as well as jump-starting a car that is out of gas.