Additional Funding for Cash for Clunkers?
August 1, 2009 by Miranda Marquit
Filed under Finance
On July 24, the Cash for Clunkers program kicked off. There was some doubt about how successful it would be. However, between the generous rebate offered by the government, and matching incentives from dealers, it turns out that Cash for Clunkers has been a roaring success. In fact, the $1 billion set aside for the program has already run out.
As a result, the U.S. House of Representatives voted to expand the program, injecting another $2 billion into this stimulus effort . (The Senate still has to approve the measure.) The idea behind the program is that dealers give the discounts, and then claim the rebate themselves . Many car dealers are offering other incentives — such as generous trade-in values, matching contributions and other promotions — on top of the Cash for Clunkers money. And don’t forget the tax credit for new car buyers that was included in the economic stimulus legislation passed in February.
With all of this, combined with a deflationary drop in prices on cars, it is little surprise that people are lining up to buy cars right now. In fact, if you are planning on buying a car in the next two years, it might be worth it to move up your timescale a little bit , and buy before the recession comes to an end. When the economy picks up, prices will rise and incentives will disappear.
Image source: Daylife
If your car doesn’t qualify for a voucher, you can get a tax deduction if you donate car to charity. Cars4Charities car donation center will walk you through the process. Details at http://www.cars4charities.org.
Thanks for this great reminder, karenc!
It all depends on how you define success. Short term it helps the car dealers and manufactures, plus provides a taxpayer subsidy to the buyers through artificial stimulus. Long-term it transfers future demand into the current quarter, adds to a ballooning national deficit, increases consumer debt, artificially shortens the service life of productive assets, with the hoped benefit of reducing gas consumption. I think artificial stimulus like this is what got us into economic trouble in the first place. We are just trading short-term gain for long-term pain.
You are right about short-term stimulus and the policy of manipulating economic growth getting us into this mess. It’s been happening since the 1980s non-stop, as political leaders from both parties tried desperately to avoid being “in charge” during a period of natural recession and economic downcycle.
Contrary to popular opinion, and having lived through them I’d argue the 80’s and 90’s were pretty darn good times economically, though we did experience the S&L crisis and the internet bubble.
The seeds of our current problems were planted shortly after 9/11 with artificially low interest rates, easy credit, lax regulation, new unregulated instruments of risk control called credit default swaps (the WMDs that Bush couldn’t find) and an outpouring of government stimulation…. a lot of the same techniques on steroids we are using now to get out of the problem.
You sort of make my point. The 80s and 90s had great economic growth, but it was stimulated by lowered interest rates and increasingly lax credit standards that made credit easy to get. The 80s and 90s created a foundation for the current economy, of which 2/3 is based on debt-fueled consumer spending. The economic events after 9/11 only reinforced where we were at. But the mindset was set before then.