Thursday, June 11, 2009

"Cash for Clunkers" scheme

The "Cash for Clunkers" program is a bad idea for the following reasons:
1. The plan is not cost effective in terms of job creation. It would spend $4500 per new vehicle sold. A car company must sell 100 cars in order to justify employing 1 assembly worker per year, since it takes about 20 man hours to produce a vehicle. So this plan spends $450K, more than what the POTUS makes in a year, to keep one autoworker employed for another 12 months.
2. It is wasteful. The plan calls for the traded-in vehicles to be scrapped. There is still some demand for SUV's and pickup trucks. By removing these vehicles from the roads, it could increase the demand for new large vehicles and increase consumption of natural resources.
3. It isn't fair to people who already drive small cars and don't qualify for the program. Don't be surprised if people hoard SUV's when the next bubble pops in the hopes that this idiocy will be repeated.

2 comments:

karenc said...

"Cash for Clunkers" will put charity car donation programs out of business since the voucher will far exceed the tax deduction. A better idea is to change the tax deduction back to the book value. That way every car is eligible and it won't cost the taxpayers $4 million.

Ju said...

while this was suppose to be for consumers, it is not. scams abound, buyers beware. check this : http://butasforme.com/2009/07/17/cash-for-clunkers-the-ultimate-bait-and-switch-marketing-tool/