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Thread: 'Cash For Clunkers' results in retrospect ... plus the 'new' version

  1. #1
    Banned Melonie's Avatar
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    Default 'Cash For Clunkers' results in retrospect ... plus the 'new' version

    from

    (snip)"Two years ago, the government paid people to throw away perfectly good older cars – many of them fully paid for – and paid them to buy a new car to replace it (even though most people could only buy a piece of the new car and had to sign up for a loan to cover the rest). It was called "Cash for Clunkers" and while its stated purpose was to get more fuel-efficient new cars on the road, it's real result was to drive up the cost of used cars (by dint of lowering the supply) so that people who lived within their means – and tended not to buy new cars – suffered higher prices so the less responsible (and opportunistic) could motor around in new cars partially paid for by their taxes.

    Let me share an anecdote with you about the effect of Cash for Clunkers on the cost/availability of older used pick-up trucks.

    Just before the program began, I bought a 2002 Nissan Frontier with less than 60,000 miles on the clock for $7,000 cash. (I never finance anything; paying for what you can afford is a key secret to avoiding the Debt Dervish that has consumed so many Americans' lives.) That's about what trucks like it were selling for, pre-Clunker.

    Today, almost two years later – and now truck now two years older – I can't find a single similar condition/mileage example for much less than $10,000. (See for yourself. Go search – which has regional as well as national listings. It's an excellent barometer for current retail/wholesale used vehicle prices.)


    Thanks, Uncle – on behalf of all the people who would have liked to buy (probably outright) an older truck with years of life still left instead of signing up for a loan on a new one – but can't now either because the trucks aren't available or because they're just too damn expensive.

    Next up – the federal giveaway for hybrid and electric cars like the 2011 Chevy Volt. It is an economic oxymoron. Built to save gas, it burns money instead – rendering the exercise moot. With a base price of $40,280 the Volt costs as much as a loaded 2011 BMW 3-Series luxury-sport sedan. A person in a position to buy a $40k car is by definition not a person who worries much about gas mileage – or to be more precise, needs to worry about gas mileage. Thus the Volt is a vanity purchase, an example of 21st-century Green Snobbery. Look how much I care about the planet! (Like Al Gore holding forth about greenhouse gasses as he motors along in his $60,000 Cadillac Escalade SUV. See the movie. They forgot to edit out this most revealing scene.)

    You may find Volts parked in front of $400,000 suburban homes occupied by white-collar workers with six figure incomes. You won't find them parked outside $75,000 condos that house people who earn $40,000 per year – and who would never spend $40,000 on a car (any car) because they can't spend $40,000 on a car.

    Not without "help," that is.

    People who sweat high gas prices drive $8,000 used Corollas or maybe a new Ford Fiesta – which by the way gets 41 MPG on the highway and costs a third what Chevy wants for its electric Albatross.

    So – once again – enter Uncle. He is offering $7,000 of your money to nudge other people to buy the Volt. Why not just give them a $7,000 voucher for free gas instead? It would cut out the crony capitalist middleman – GM – and probably cost less, too.

    Of course the problem there is not everyone gets a check. The way our system works, some use the government to feed off others. GM uses the government to extract money from some of us, in order to offer financial incentives to others, so that they will "buy" GM's economically impossible high-tech lemon.

    GM benefits; the people who "buy" the Volt benefit.

    Taxpayers lose. More precisely, responsible people who try to live within their means – and not off the backs of others – lose.

    Again.

    In a rational world, without artificial "incentives" that throw everything off, people would buy cars they can afford and which make sense for them and their situation. The automakers would build cars to satisfy that demand, instead of throwing cash – and not their own cash – like so much confetti at projects that aren't ready for prime time or which can't make an economic case for themselves."(snip)

    (snip)But, what can you do? It's either cash in and grab the subsidy – or be the sucker who helps pay for them and gets nothing in return.

    Except the bill.(snip)

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    God/dess Zofia's Avatar
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    Default Re: 'Cash For Clunkers' results in retrospect ... plus the 'new' version

    All electric cars, like golf carts, probably represent a 10% increase in fuel efficiency. The electricity has to be created by some process, usually by burning coal, oil or natural gas. The electricity has to be transported over power lines. The end result is about a 10% decrease in energy consumed for the mile traveled. Not a huge improvement for a lot of money. If the electricity is generated by nuclear plants, then there is a great decrease in the amount of pollution generated. That's a good thing. But, we do not have near enough nuclear plants.

    But, the volt is not an all electric. It's really a hybrid. That means it's got an internal combustion engine aboard along with batteries and an electric motor. Sort of like wearing suspenders and a belt. The volt carries along a lot of excess motive capacity because neither the engine nor the batteries have enough capacity to provide for meaningful driving distances. Take a volt, replace its batteries and motor with a Ford Fiesta engine and you've probably got an almost as efficient car that drives farther and offers a better experience. Of course, Ford has already occupied that market segment so GM would have some tough competition on its hands. (Competition that it probably could not beat with its weakened finances.) What you get with a volt is a slightly less efficient golf cart that offers a road legal driving experience and not much more.

    Z

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    Banned Melonie's Avatar
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    Default Re: 'Cash For Clunkers' results in retrospect ... plus the 'new' version

    All electric cars, like golf carts, probably represent a 10% increase in fuel efficiency. The electricity has to be created by some process, usually by burning coal, oil or natural gas. The electricity has to be transported over power lines. The end result is about a 10% decrease in energy consumed for the mile traveled.
    This is arguably only true if one does NOT count the huge difference in input energy required to produce the additional components of an electric vehicle i.e. miles of copper wire, batteries, rare earth magnets, electric motors etc. However, given that most of this actually takes place in Asia /China, utilizing gov't subsidized electricity from unscrubbed coal fired power plants, it is understandable why this component is ignored in most US analyses.

    Your remaining analysis of the Chevy Volt ... and other 100% electric vehicles or heavily electric 'charge at home' hybrid vehicles where the size / weight of the batteries and motors is a significant portion of the vehicle's total weight ... is absolutely correct. The overall energy efficiency gains are marginal. And in point of fact, overall energy efficiency may go negative when electric vehicles are used in climates where vehicle heat is necessary !!!


    What you get with a volt is a slightly less efficient golf cart that offers a road legal driving experience and not much more.
    What you also get is up to $14,000 worth of additional US taxpayer debt to finance the federal and state tax credits 'given' to the Volt buyer, plus another ~$3,000 + in additional US taxpayer debt to make up for lost tax revenues resulting from the Volt buyer's de-facto marginal income tax rate being reduced by the tax credit !


    Take a volt, replace its batteries and motor with a Ford Fiesta engine and you've probably got an almost as efficient car that drives farther and offers a better experience.
    Actually, by the numbers, THE most energy / cost efficient small car technology ( or was ... where the USA is concerned at least ) are the small diesels. However, due to the strict diesel emissions regulations enacted by certain states, the only auto company that has chosen to undertake the engineering and testing costs necessary to market reasonably priced reasonably high performance small diesels in the US is Volkswagen. Several of the 'luxury' foreign automakers also offer diesels in the US, but they are far from reasonably priced thus well beyond the reach of all but the highest earning Americans. And the US automakers are doing absolutely zilch re the development of diesel cars.

    Additionally, new entrants into the small diesel arena have been stymied by those strict state diesel emissions regulations ...



    ... unfortunately, no car company can afford to write off potential sales in California, New York etc.

    Ultimately, the 'real issues' are the fact that electric vehicles trade tailpipe emissions for power plant stack emissions ... with lots of tailpipes but few / no power plant stacks located in certain large US cities ! Also the fact that electric vehicles have an accepted / established structure of US gov't subsidies and tax breaks in place. Circling back on topic, it is certainly a legitimate question to ask what the cost of these US gov't subsidies and tax breaks re electric ( or heavily hybrid ) vehicles is actually delivering in terms of overall fuel consumption and emissions results ... as well as other (officially admitted at least) unintended consequences.



    ~
    Last edited by Melonie; 01-22-2011 at 07:43 AM.

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    God/dess hockeybobby's Avatar
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    Default Re: 'Cash For Clunkers' results in retrospect ... plus the 'new' version

    I'm very happy with my new Ford Fiesta 5 door.
    Electric cars will make economic sense eventually, but for now, the Fiesta rules.

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    Banned Eric Stoner's Avatar
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    Default Re: 'Cash For Clunkers' results in retrospect ... plus the 'new' version

    Three economists from MIT and Texas A & M crunched the numbers and have shown that "Cash For Clunkers" was a total failure. Estimated consumer spending on vehicles without the program would have been $4 billion higher. It was bad fiscal policy , bad economics and bad environmental policy.

    Classic Keynesian economics says consumption drives growth. Daniel Mitchell at the Foundation for Economic Education and others have shown that rather than encourage more spending it is far better to focus on increasing income across the board. Growth causes personal and business income to grow which results in more spending ; more taxes paid ; more charitable giving ; more hiring and higher salaries.

    When Melonie first posted on this topic the consensus was that "Cash for Clunkers" had no long term economic impact. Now it has been shown to have been a net negative.

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