Good, Bad or Bribery?
Cited: Time
Well, the Cash for Clunkers program is over and. It seems that in the final days of the program, car dealers were actually turning away buyers. The reason could be very simple; the government website crashed trying to keep up with all the paperwork. What does it tell you about our nation’s character when the most popular government program in years that was aimed at reviving the economy from its vegetative state was an economically, environmentally and politically lazy handout from 99% of the population to the other 1%?
The Secrets to Cash for Clunkers’ Success
It used to be, when we wanted to use public policy to nudge private behavior, we poked people with a stick: 40 years of issuing health warnings couldn’t reduce smoking as much as hiking taxes so that a pack can cost upwards of $9. But nowadays, Congress would much rather reward than penalize, and bribery as policy has a modern elegance to it. Cash for Clunkers didn’t involve intricate algorithms or a 1,400-page appropriations bill. The only debate was over how much sugar was needed to sweeten the pot. That first billion was supposed to last a few months; when it ran out in a week, a bipartisan coalition voted to squirt $2 billion more into the pipeline. Here, finally, was stimulus policy Americans understood.
Researchers find that people will buy something on sale even if the reduced price is higher than the regular price at another store. “Just seeing the difference between the full and reduced price motivates the purchases,” explains Ellen Ruppel Shell in her new book, Cheap: The High Cost of Discount Culture. “It is as though, rather than spending the cost of the product, we’re actually earning the savings.”
Which raises the tantalizing question of how such delusional psychology might be applied to our other problems. There are already plans for Dollars for Dishwashers; buyers will get a rebate if they scrap that energy-sucking appliance for a more efficient one. Arizonans debated boosting election-day turnout with the Voter Reward Act, which proposed treating ballots like lottery tickets: one lucky voter would have won a million dollars. New York City pays public-school students to get good grades.
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But these are penny-size ideas. Now that trillion has replaced billion in our fiscal conversations, the scope for inventive incentives is vast. The cost of treating obesity has doubled in a decade, to $147 billion. So how about Cash for Chunkers: we get to trade in that extra 20 pounds for a coupon good at the local farm stand. Roads and bridges crumbling? Why bother allocating $27 billion in stimulus money when we could pay people to reroute or, better yet, stay home? California plans on releasing at least 37,000 inmates to ease prison overcrowding and save $1 billion. It costs $27,000 a year to keep someone in jail. It would be much more efficient to pay thieves not to steal in the first place.
Is this the essential paradox of the age of Obama, that we have to destroy the village in order to save it, 
bust the budget in hopes we’ll someday balance it, play to self-interest to promote the national interest? Just as the Cash for Clunkers frenzy reached its peak, the Administration quietly released new deficit projections, which pointed to a $9 trillion gap over 10 years. In the middle of a national nervous breakdown over out-of-control spending, we took a summer break from puritanical fretting and got all excited about a federal subsidy for something we already buy more of than we need.
Of course, critics are right that the program will probably drive up the price of used cars for poor people who need them and will have only a marginal effect on the long-term prospects of the auto industry. Subsidies don’t so much increase demand as kidnap it, inspire people to take the money they were saving for a new fridge and apply it to a pickup instead. As for the environmental benefit, the new fleet will save about 160 million gal. of gasoline a year–which sounds awfully good, except that we use 378 million gal a day.
But all that misses the point. The goal of the policy was only incidentally to sell more cars or scrub the air. It was mainly aimed at reviving our animal spirits. We will know, when the history of the Great Recession is written, whether this summer brought the turning point, when we crept out of our little boxes, felt a hunger for the open road, our spirits drunk on the smell of vinyl and the feel of the wheel.
Neither liberal nor conservative, the beauty of the policy was deeply pragmatic. What you do is try a little bit of everything just to see what works. History has shown us that irrational patchwork of solutions has a decent record of accomplishment. If a program like Cash for Clunkers is all it takes to get our economy up and moving again then just maybe that $3 billion was the best throwaway money Washington ever throughout.
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My Take: I think it is a shame that they have stopped the program. The environment was going to get better with more economical vehicles on the road. I think the government just did not anticipate such a large response to the program. Then again, the government is always behind the times.
Hopefully, they will bring the program back at a later date. Maybe even I will be able to afford a car than. Or maybe, they will start a first car owner program like that first homeowner program! That would be interesting! I can just see the 16-year-old rushing to local car dealership to get their first car at a reduced rate. That would be a hilarious site.
If that did happen, more kids would be going to an academy driving school NY so that they could get a car quicker and then they would make the visit to the New York State DMV. I hope their parents would be smart enough to also make them take a defensive driving course so that they are safe on the road. There is even a NY defensive driving online class for those who cannot make it to a regular classroom
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