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Thursday, August 6, 2009

Cash for Clunkers - Good Idea?

So, if I am understanding this right, I can trade in a clunker, a gas guzzler, for the purchase of a new automobile that offers better gas mileage for a whopping $3500 or $4500 depending on the vehicle, I guess, and our government is going to pay for it, or I should say the taxpayer is going to pay for it. Of course, I know there are rules and the car pictured above does not qualify because it is more than 25 years old. Now don't be making no judgements yet, I am just trying to understand this cash for clunkers program.

Now that our government is in the automobile business (after bailing out the industry for those of you who have been in a coma), Is our government forking out money just so we can purchase our competitors cars? At first glance, it would seem that the USA is not doing so well because all of the top 10 trade-ins are from the USA and only 4 of the top 10 new cars are manufactured from Detroit's Big Three. However, those 4 are accounting for about 47% of the sales and the number one car being sold is the Ford Focus. Normally, American made cars make up about 45% of sales. Also, it should be noted only 3 are not made in North America, the Toyota Prius and Honda Fit are made in Japan and the Hyundai Elantra is made in Korea. So I guess Americans are not losing any jobs over this program.

However is it good for the environment? According to Business Week, "don't expect it to help save the planet from global warming or reduce U.S. dependence on imported oil." They offer a detailed description concluding mathematically that it will only save approximately 0.04% of gasoline and gas emissions, a mere drop in the bucket.

So is it worth the $3,000,000,000.00 price tag? As a stimulus program, the program is helping the economy in the short term. However, Lee Schipper, project scientist in Global Metropolitan Studies at the University of California at Berkeley states, "That doesn't mean it's not helping Detroit in the near term, but I don't think anyone sees any long-term benefits."

My conclusion, I believe we could have found a better use for the $3 Billion to stimulate the economy. I am not an economist and I do not pretend to have a solution but paying outrageous prices for clunker automobiles just to feel like we are doing something good for the environment makes no sense. There are many better solutions to reduce our dependance on foreign oil. Although, it may not be costing us jobs, all of the profits are still going to our competitors.

Here is a list of both of the top 10's provided by U.S. News and World Report. The video below is from an article posted by the Los Angeles Times.

The Top Ten Cash for Clunkers Trade-Ins:

1. 1998 Ford Explorer
2. 1997 Ford Explorer
3. 1996 Ford Explorer
4. 1999 Ford Explorer
5. Jeep Grand Cherokee
6. Jeep Cherokee
7. 1995 Ford Explorer
8. 1994 Ford Explorer
9. 1997 Ford Windstar
10. 1999 Dodge Caravan

The Top Ten Cash for Clunkers New Cars:

1. Ford Focus
2. Honda Civic
3. Toyota Corolla
4. Toyota Prius
5. Ford Escape
6. Toyota Camry
7. Dodge Caliber
8. Hyundai Elantra
9. Honda Fit
10. Chevy Cobalt

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