Read the Bills Act Coalition

Thursday, August 20, 2009

Fraud, Slight of Hand and Cars for Clunkers

As we are beginning to fraud emerge from TARP and the stimulus, we should prepare for massive fraud with the Cash for Clunkers program if the program we borrowed the idea from (Germany) is any indication. This is the problem with massive government programs be it Medicare, Welfare or Cash for Clunkers fraud always follows suit……From the CATO Institute:

This may well be the case with Germany's reprehensible cash-for-clunkers program….Germany's police union, the Bund Deutscher Kriminalbeamter, estimates that about 50,000 cars destined for the scrap yard under Berlin's trade-in scheme have been illegally resold to Africa and Eastern Europe. The government had paid around รข‚¬125 million for these vehicles to be destroyed so that people would buy new, more fuel-efficient cars. German environmental group Deutsche Umwelthilfe predicts a doubling of illicit exports by the end of the year. It's probably only a matter of time before American clunkers will likewise find their illegal way to the streets of Mexico and beyond. And humanity would be better off if they did….This is where the environmental argument for destroying the clunkers comes in. The old cars must disappear, we are told, because they contribute to global warming. Let's look first at the rather dubious claim that trading in your old car for a more fuel-efficient new one reduces carbon emissions. If half of the new sales would have occurred anyway and the other half merely brought forward purchases rather than created new ones, then the real mileage effect appears quite limited. What's more, the energy required to manufacture a car accounts for as much as 45% of its lifetime energy consumption. So replacing old cars with new ones requires a big up-front energy investment. And crushing old cars and converting them to steel consumes more energy than exporting them……It is true that selling clunkers to the Third World will increase emissions in those countries by increasing the number of cars on the road. But denying those poor people access to affordable cars means lowering their living standards. Lower living standards will of course always reduce energy consumption, but surely that cannot be a desirable policy objective…..Moreover, many of our clunkers are bound to be more efficient and more environmentally friendly than cars currently on the roads of many of the world's poorest countries. Selling the clunkers to them, therefore, could defray the cost of the clunkers programs while also upgrading the stock of cars in Africa and elsewhere.

If we cannot prevent the fraud and environmental impacts then this program is just a waste of tax money propping up a government owned automobile industry that cannot make it on their own.


Jordan Hixon said...

It is such a shame that all these "clunkers" have to be destroyed. Why not resell them cheap?

Jody L. Wilcox said...

It will really effect the used car market...the best way to buy a car.