Cash For Clunkers Is A Clunker

According to cnnMoney the cash for clunkers program numbers are in and those numbers don’t look too good.

In the article, a reputable automotive review site Edmunds.com shared analysis about the 2009 year end sales predictions and compared those figured with the actual number of sales that cashed in on the clunkers program. Here is what those numbers look like:

• A total of 690,000 new cars were cash for clunkers deals.
  
  
• Even in this economy 565,000 of those sales we previously predicted.
  
  
• This leaves 125,000 auto sales that no one anticipated and that could be attributed to the program
  

In dollars what does this mean?

Well, if each deal cost the taxpayer $4,000 in rebate dollar to the purchaser, that means that the program cost $2,760,000,000. That's almost $3 billion! More importantly, if you remove the 565,000 auto sales that were already predicted, then divide nearly $3 billion across the remaining 125,000 new and previously unpredicted sales, the taxpayer paid around $20,000 per clunker (give or take a few thousand bucks.)

So what does $20,000 in taxpayer money buy us?

Here is a nice truck! Would you pay $20,000+ for this truck? Wait for it. You don't actually get the truck, though. You are simply buying the right to have the truck put down. Half of the Cash for Clunkers gimmick was about taking old gas-guzzlers off of the road. So once those heaps were purchased (with your taxpayer dollars), they were put out to pasture. That's right. Your $20,000 in taxpayer cash was used to buy and then crush this car. What a deal!

More offensive than the waste is the program managements response to that waste:

“It is unfortunate that Edmunds.com has had nothing but negative things to say about a wildly successful program that sold nearly 250,000 cars in its first four days alone," said Bill Adams, spokesman for the Department of Transportation.

Let's read through that government spin and re-interpret that quote...

“It's unfortunate TO OUR PROGRAM that Edmunds.com has NOT TAKEN THE TIME TO FIND A POSITIVE SPIN BUT RATHER FOCUSED ON THE OBVIOUS FINANCIAL FLAWS OF OUR PROGRAM AND EXPLAINING THEM TO THE PUBLIC DESPITE THE FACT THAT WE AT THE GOVERNMENT WOULD LIKE TO CONTINUE TO CONSIDER THIS A wildly successful program that sold 250,000 cars in it's first four days alone EVEN THOUGH ONLY HALF OF THOSE EARLY SALES CANNOT BE DIRECTLY ATTRIBUTED TO THE PROGRAM ITSELF.”

Isn't 125,000 sales still a big number and should we cut the program a break?

Shouldn't we just celebrate big numbers? Well, if they had sold 1 billion cars over the program period, then it would have been a success. You might be thinking “Steve... seriously!!! They would have to have sold 1 billion cars for it to be successful! Is that really reasonable? Was there even enough time in the program in a good economy to have sold 1 billion cars?”

You are right. It isn't reasonable. In fact, 1,000,000,000 car sales isn't enough success by the numbers!

Let's run the numbers. 1 billion cars would have meant that half of those cars were attributable to the program, lowering the rebate per car cost to the taxpayer down to $5,500 per car. Technically, they would have needed to sell over a billion cars such that about 630,000 of those sales could be directly and reasonably attributed to the program to just get the per car number down to $4,500 (the maximum rebate.) Mind you, we as the taxpayer are still footing the bill to underwrite U.S. auto sales which almost makes no sense to me!! But at the minimum this should have been the target for success. If there wasn't enough time to hit a reasonable margin for financial success then WHY DO THE PROGRAM? At what point and by what measure does running a program that simply creates more debt at the expense of taxpayers become a good investment?

Calling 125,000 new auto sales a success just verifies that the government has no idea how to measure success.