The Car Allowance Rebate System is of course better known as “Cash For Clunkers”.  If you haven’t heard of this program I hope you didn’t vote last fall either.  In short it allows you to trade in your POS for a new, fuel efficient car.  You still have to pay for your new ride but the government chips in $4,500 to help towards the purchase.  The idea behind this program is to be “green” and promote the purchase of more fuel efficient vehicles; even the government site for cash for clunkers is green.  It gets guzzlers off the road and saves you money on a purchase and at the pump.  Win/win.

WRONG

Well, wrong in that this wasn’t what the program was really designed for.  The Obama Administration and Congress are happily advertising this program as a green initiative, but that’s a front.  It’s actually an economic stimulus and that was the goal from the beginning.  The “stimulus” passed earlier this year of course was not a stimulus but a long-term investment in the future of the country.  I think that was the right way to go but in order to get it passed they faked it as a stimulus.  This time around they’re hiding under a green veil to pass an actual stimulus.

How is this stimulating? Think of the car companies.  Sales have been awful.  So awful that 1.5 of the Detroit 2.5 went bankrupt!  But rest easy.  July numbers have shown improvement already thanks to CARS and August will probably look even better.  Further still, GM is bringing employees back to work just because of Cash for Clunkers!

So automakers are stimulated by sales but who else gets stimulated? The banks.  Do you think most people are paying cash for their new rides?  Unlikely.  Most of us finance our cars and a $4,500 discount isn’t enough to get us all paying cash.  The dealer finance industry must be loving this time too.

What we have then is a hidden auto industry bailout, a small boost to bank lending, you buying a fuel efficient car, and clunkers off the road; all under the cover of “being green”.  If they wanted to be green there are a number of different ways they could have done this.  High registration fees at point of sale and retroactive gas guzzlers taxes are just two.

So who is the real winner?  You are.  This is a stimulus after all and it’s the first one that has worked.  This Cash for Clunkers program is the final push we needed to end the recession.  Yes, the recession is over.

Cash for Clunkers is the kind of inventive program we needed all along.  No, doing it back in January 2008 wouldn’t have saved us from recession, but it has been the absolute fastest way to get people spending again and inject money into the economy.  Yes, this is even faster than stimulus checks.  It’s faster because it stimulated spending and lending.  I love Cash for Clunkers, and I applaud every single person involved in selling it to us as a green initiative.  It worked.

Photo: threadedthoughts

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categories: economics, environment, government