WSJ: The program was the biggest clunker of 'em all

I'm not terribly surprised that the much-ballyhooed Cash For Clunkers program is turning into, well, another clunker.

It looked good for a couple of minutes, or long enough for (now government-run) automakers to see a nifty little spike in business. But that spike is over, folks have their brand new cars and even newer payment books, and auto sales are now flatter than before.

Meanwhile, the people who have just a few hundred bucks to spend on a beater car, well, they're straight out of luck. These beater cars -- the ones the government took off motorists' hands for some vastly inflated sums -- now sit in junkyards, with some sort of "liquid glass" lining the innards of the engines. That stuff's better than Karo syrup for destroying an engine.

Here's how the Wall Street Journal put it:

Cash for clunkers had two objectives: help the environment by increasing fuel efficiency, and boost car sales to help Detroit and the economy. It achieved neither. According to Hudson Institute economist Irwin Stelzer, at best "the reduction in gasoline consumption will cut our oil consumption by 0.2 percent per year, or less than a single day's gasoline use." Burton Abrams and George Parsons of the University of Delaware added up the total benefits from reduced gas consumption, environmental improvements and the benefit to car buyers and companies, minus the overall cost of cash for clunkers, and found a net cost of roughly $2,000 per vehicle. Rather than stimulating the economy, the program made the nation as a whole $1.4 billion poorer.

Like nearly all governmental actions, this can be explained away by the great phrase, "it seemed like a good idea at the time." And, yeah, this program was a bonanza for those who wanted to get some new wheels but were shortstopped by the fact their existing cars were not worth very much. A friend of mine got rid of his junker (though it wasn't that bad -- what the hey, it ran) and upgraded through the program. He got a sweet deal on his trade-in through the program, and now he has a car he may or may not be able to afford. What's more, the trade-in amount is treated as income, therefore taxable.

Really, the only one to derive any real benefits from the Cash For Clunkers program (with the exception of my friend, and that's debatable) is the auto industry. It's not hard to figure out. The Big Three automakers are on life support right now, the industry is propped up by governmental funny money, and the program was just a fancy version of corporate welfare.

The other day I checked out the ads for cars in the $1,000-$1,500 range -- those which the Web-savvy would call POS cars (if you're not Web-savvy, DON'T ask). There isn't much of anything there; these cars seem to have disappeared off the market. So the guy who needs a car but a) can't afford much better or b) can't get financing, well, he gets to walk. There is a market for such rolling pieces of wreckage. I've driven a few of them, and one of the byproducts of driving one is that I learned to be halfway good with a wrench. And found lots of cool uses for duct tape and WD-40.

The thought of destroying perfectly good assets to create wealth may make sense to a bureaucrat, but to living breathing working people out there in the real world, it's total nonsense.

The car manufacturers are finding Clunkers to be nothing more than a bump in the free fall. In September, the first post-Cash for Clunkers sales period, saw Chrysler's new-car sales figures dive by 42 percent off September 2008. In that same period, GM's numbers went into a redline dive of 45 percent. Yet Ford's numbers only slipped five percent in that time; you tell me.

From the WSJ again:

In the category of all-time dumb ideas, cash for clunkers rivals the New Deal brainstorm to slaughter pigs to raise pork prices. The people who really belong in the junk yard are the wizards in Washington who peddled this economic malarkey.

Now there's scuttlebutt there may be Cash For Clunkers programs for refrigerators and home appliances coming down the pike. What's next? VCR's? Stereos? Computers, perhaps?

Anyone know a quick way of getting that liquid glass gunk out of an engine?

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You tell me: Can you see any Cash For Clunkers benefits that I don't see? Did you upgrade your wheels through this program? Got any other clunkers you wish to get rid of in future programs? Use the comments section for input.