The Clash for Clunkers program was designed to revive business at car dealerships, remove inefficient cars from the road, and boost struggling auto companies. The first installment of $1 billion dollars was so popular among consumers that congress appropriated another $2 billion to the program. Aside from the popularity of the incentive—up to $4,500 dollars in trade-in value—it created a massive bureaucratic headache. Massive amounts of complex paper work, in addition to confusing procedural requirements, were necessary to be certain the “clunker” was destroyed. In many cases, incomplete forms or errors in the information submitted by dealers slowed the process and applications were sent back. President Obama said the work force handling the applications would be tripled to speed up the delays. Long delays and uncertainty among dealerships about getting the rebate from the government led to the program being cut two months early on August 24, 2009 (Bunkley).
The logic at the inception of the “Cash For Clunkers” program was that marginal new car sales would offset the value lost in the mechanics and secondary parts markets. The truth is, however, that perfectly good automobiles are being thrown away in an unprecedented bout of destruction. Mechanics and auto parts dealers have yet to see if this uniquely American act of value destruction will affect their businesses. Note that the $4,500 government subsidy does not pay for a whole car, so the “Cash for Clunkers” program ultimately served as an enticement for many more Americans to fall further into debt.
Bunkley, Nick. Government Will End Clunker Program Early. New York, New York: NYT. 20 Aug 2009. Accessed 20 Aug 2009 http://www.nytimes.com/2009/08/21/business/21clunkers.html
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