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Cash for Clunkers round-up

Here is perhaps the best illustration of the folly of Cash for Clunkers that I have come across. It's a video of a perfectly good 2001 Mazda light pickup with 75,000 miles being prepped for the scrapyard. In fact, you should check out the other videos posted by Promise383 (some NSFW language) and see for yourself how many good used vehicles that the C4C program has taken off the market. (h/t John Stossel)

John Stossel summarizes:

The politicians who defend Cash for Clunkers remind me of the silly people who said that the rebuilding that would come after the destruction of Hurricane Katrina would "stimulate" the economy. What they forget is that the money for rebuilding --and the cash-for-clunker money--is forcibly taken from people who would have used that money to create other things.

As of last week, only 7% of the promised dealer rebates had been paid out. Auto dealers must complete a 13 page rebate application in order to receive payment. Thousands of these applications have been rejected and sent back to dealers with no indication about what was wrong with them. But have no fear, in order to speed up the (predictably) bogged down and backlogged reimbursement process, 1200 additional government employees were redirected to help process the thousands and thousands of Cash For Clunkers rebate applications piling up at the DOT -- including "non-essential" employees from the FAA's air traffic control unit. One also has to wonder what the government will do with all the new employees recently hired by the DOT to run the Cash for Clunkers program, once the program comes to an end.

Because the government reimbursements have been so slow, car dealerships are experiencing major cash flow problems. GM has been forced to give bridge loans to its dealers so they will have enough money in the bank to operate. Think about this for a minute: GM, which was bailed out by the government, has to bail out auto dealers who have been left strapped for cash because the government can't efficiently pay out cash rebates from a program that is (presumably) being paid for by deficit spending. I guess if you're a government bureaucrat, that's how you define "success."

By now you might be wondering which car companies have sold the most new cars as a result of Cash for Clunkers. Here are the top ten new vehicles purchased through the program:

  1. Toyota Corolla
  2. Honda Civic
  3. Toyota Camry
  4. Ford Focus FWD
  5. Hyundai Elantra
  6. Nissan Versa
  7. Toyota Prius
  8. Honda Accord
  9. Honda Fit
  10. Ford Escape FWD

Notice who's missing? Yep -- Chrysler and GM. Could it be that a significant number of Americans now find Ford to be a more trustworthy automobile manufacturer, simply because they are not under government control? In fact, Edmonds.com is predicting that Ford's August 2009 sales will increase by over 20% from last August's sales figures, while GM and Chrysler's August 2009 will shrink another 20% from their already dismal August 2008 levels. Unsurprisingly, the biggest market share of new Cash For Clunkers purchases went to Toyota, whose sales accounted for fully one-fifth of the new cars sold.

Okay, maybe I'm being too pessimistic. Let's forget everything you've just read. You're happy with your Cash For Clunkers purchase. You think you did the right thing, and you don't think that your new car purchase will affect the amount of money that you spend on consumable items in the near future. Great -- unfortunately, your Cash For Clunkers rebate might be taxed as income. Or will it? Even though the rebate cannot be counted as ordinary income for the purposes of Federal income tax, there is still a considerable amount of confusion about how the rebates will be taxed by states -- will it be counted as ordinary income, or will it be factored into the computation of excise tax paid when state license tags are purchased?

The more we learn about Cash For Clunkers, the more it becomes apparent that this awful clunker of a government boondoggle should have never gotten off the ground.
...

More information about state taxes on Cash For Clunkers rebates is available at Tax Prof Blog.


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Comments (21)

Another wonderful program b... (Below threshold)
Mycroft:

Another wonderful program brought to you by Pelosi, Reid, and Obama.

I guess I dodged that bullet and hung onto my older car.

Obama - worst president ever!

Now, I feel better already.... (Below threshold)
timajin:

Now, I feel better already. Can't wait until "non-essential personnel" from the FAA, DHS, USPS, and DMV get re-directed to do triage in emergency rooms to keep up with demand. I mean government employees are pretty much interchangeable. Right? C'mon, nod in the affirmative with me. Just look at the kid who jumped from college with no auto industry background to lead the auto recovery for the white house. Awesome dude!

And the law of unintended c... (Below threshold)
JLawson:

And the law of unintended consequences hits once again.

$3 bil out - hundreds of thousands of good cars destroyed, loads of people getting new cars (but not GM models, go figure...) who may or may not be able to afford them (guess we'll have to see what happens to the repo rates, eh?) and they didn't figure out whether it'd be seen as taxable or non-taxable income?

And THESE are the people who you want running health care? Forgive me, but I think I'd rather throw myself on the tender mercies of insurance companies - because I think the folks in Washington know how to do only ONE thing well... and that's getting elected into office!

Consider the consequents of... (Below threshold)
Mac Lorry:

Consider the consequents of the "your Cash for their Clunkers" program as just another teaching moment brought to you by the Liberal Institute of Amoral Research (L.I.A.R.) that's set up shop in Washington.

Well what do you expect? Mo... (Below threshold)
G.:

Well what do you expect? Most of us knew he was an amateur. Except for the left who have no bloody sense anyway.If you are a conservative and you helped vote these guys in, I'm sorry, but you should have your ass kicked! What the HELL!
The left has become one HUGE cult. Think about cults, if they don't fit that definition I don't know what does...oh,...BECAUSE of obama.... 8-| (= blank stare)

*sigh* I think I've been abducted to another planet.

Three thoughts If ... (Below threshold)
Constitution First:

Three thoughts

If 1/3 of an automobiles energy life-time use (225,000 miles) is in it's manufacture, then destroying the engine at 75,000 translates to 75% of the energy used was simply to build it. Huge waste of energy.

Most cars that really should be taken off the road never would have qualified. They are either over 25 years old, or their owners can't afford to buy new. If you think there aren't a boatload of 25+ cars still on the roads, you don't drive in farm country much.

Last, the majority value of any used car is it's engine. This fact drives a huge industry of everything from used cars sales to boneyards. for some of you this is just a distant memory of your youth, but for an increasingly larger portion of this nation, it's an old and used car or it's hoofin' it. This poorly thought-out calamity affects the poorest among us the most. I have run used cars for 33 years, it will just cost me more now.

Our president is either an idiot trying to destroy the country or he doesn't give a rats ass about the poor.

1 vote for the Idiot trying... (Below threshold)
G.:

1 vote for the Idiot trying to ruin this country.

1 vote for he doesn't give ... (Below threshold)
G.:

1 vote for he doesn't give a rats ass about the poor in this country.

WHat do you expect from the... (Below threshold)
LiberalNitemare:

WHat do you expect from the democratic elite?

Obama and his ilk wouldnt be caught dead in an 8 yr old car.

"Best, brightest, most inte... (Below threshold)
GarandFan:

"Best, brightest, most intelligent administration, ever!"

And to add to your viewing pleasure:
http://newsbusters.org/blogs/seton-motley/2009/08/28/video-fcc-diversity-czar-chavezs-venezuela-incredible-democratic-revol

How about "Cash for Constru... (Below threshold)
_Mike_:

How about "Cash for Construction" ?

See... if you live in a house that's more than 10 years old, the government will purchase the house for more than it's worth and hten destroy the house. This will stimulate the construction industry just like the "Cash for Clunkers" did the auto industry.

I know the economically literate are probably thinking..."wait, on net, you've spent tax money to destroy an useful asset. That's a loss on net." That's the beauty of government... only it can do something so stupid and not go bankrupt.

I have a 2001 Mazda B4000 p... (Below threshold)
Oldflyer:

I have a 2001 Mazda B4000 pickup. I wouldn't let them touch it for anything.

But, I will probably have trouble finding parts if I should need them.

How long before we get "Cas... (Below threshold)
GarandFan:

How long before we get "Cash for Cogers!"

Turn in gramps or grandma, get a $4.5k check. Relieves the strain on medicare and social security. Barry can wave a flag while standing in front of a large sign saying "It's patriotic!"

The scary part is that he'd have people agreeing with him! VIC? SAUD? LLD?

Here we are, my wife, son #... (Below threshold)

Here we are, my wife, son #1, and I searching for a good, safe, reliable, affordable used vehicle for son #1 who is almost 18 and the gov't is doing everything they can to destroy as many vehicles as possible in said categories.

We have been shopping for two months and, due to this Cash for Clunkers shinola, we have been unsuccessful.

The ramifications from this program on our economy have not even begun to be understood.

Hang in there. Over the ne... (Below threshold)
GarandFan:

Hang in there. Over the next 3 months he may be able to pick up a brand new car instead. Those showrooms are going to be as empty as the inside of Barry's head.

_mike_ - "See... if you... (Below threshold)
Marc:

_mike_ - "See... if you live in a house that's more than 10 years old, the government will purchase the house for more than it's worth and hten destroy the house."

the cap and tax bill has something close to that....

If will require home owners prior to selling a home have it inspected to ensure it meets the "green agenda," if not the owner must spend thousands to update it prior to selling it.

This is probably the stupid... (Below threshold)
bobdog:

This is probably the stupidest, most economically ignorant federal program I've ever heard of.

And that's saying a hell of a lot lately.

This helps us how, exactly?

Certialy BARACK OBAMA is am... (Below threshold)
Flu-Bird:

Certialy BARACK OBAMA is americas worse president in its history even worse then carter or clinton

I beleive this new legisl... (Below threshold)

I beleive this new legislation is a big win for consumers who is ready to buy a new car with fuel efficient models

Car donation charities are ... (Below threshold)

Car donation charities are very glad cash for clunkers is over. The number of car donations fell by 25% during it. It only fell by that much because many vehicles didn't meet the mileage requirement!

Theres too many old clunker... (Below threshold)
Flu-Bird:

Theres too many old clunkers in washington D.C. we need some trade-ins next year




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