Senate Passes “Cash For Clunkers” AKA “Please Buy A New Car”

Billed as a law to increase the number of low emission cars on the road, the Senate passed a $1 billion “Cash For Clunkers” program recently to give vouchers to consumers who trade in their gas-guzzlers of yesteryear for more fuel-efficient models. In yet another thrilling example of effective legislation, the old car must be driveable and the voucher must be used on a new car and would be up to $4500. Because zero new models currently cost anywhere near $4500, this amounts to a $4500 coupon off the purchase price of a brand spanking new car with good gas mileage if you trade in an old shitty car that’s good enough to drive. So people are gonna start buying new cars like gangbusters and our economy will be saved! Only weird part is, if you have an old useable car, why would it make sense to spend a whole bunch of money on a brand new car, ITE (inthiseconomy)?

Please don't let me go.

The plan will be run by the National Highway Traffic Safety Administration, and works like this:

Under the program, trade-in vehicles, 1984 models or newer, must have average fuel economy of no more than 18 miles per galloon and must be registered and insured to the same owner for at least a year. And the new car or truck must get better gas mileage than the one that was scrapped.

The payoff grows depending on the difference in the fuel efficiencies of the old and new cars. For instance, a new car getting at least 4 more miles per gallon than the old car will be eligible for a $3,500 voucher. A new car getting at least 10 more miles per gallon would get a $4,500 voucher.

People look at successful similar programs worldwide, e.g. Germany, and think our Cash For Clunkers just might help. In Germany, the program was so successful that two months before it was due to expire, twice the amount of people the government budgeted for had applied for a voucher. It also caused a shift in spending away from such items as consumer electronics in favor of auto purchases.

As economists have suggested, just because this program is popular, it doesn’t mean that people are making sound economic decisions. As Jürgen Michels, economist at Citigroup in London said to the Financial Times: “It seems that Germans are so obsessed by tax advantages that they are no longer acting entirely rationally here.”

Buy! Buy! BUY!!!

Ok, look, if this seductive type of program made Borg-like Germans lose their heads, it’s def going to cause a shitstorm of poor spending in the US. And that is awwwesome because it’s exactly what the Senate must want. To recap, you are driving a car that’s worth less than $4500, you give it up and buy a new car for something at least $10000 more than your $4500 coupon, then you have a new car, no more old driveable car and $10000 in debt. You are stupid.