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I'm still against the premise of this program. This was a redistribution of wealth to failing industry and to people who owned poorer cars. A couple B's in the

I'm still against the premise of this program. This was a redistribution of wealth to failing industry and to people who owned poorer cars. A couple B's in the larger scheme of things may not seem like a lot, but the underlying ideology is quite dangerous, and I'm hearing rumours that this may be expanding to appliances that are not energy efficient. There's a much simpler way to accomplish the same effect: tax energy. You will have an economic incentive to get more efficient appliances, cars, etc while this costs the federal government very little. To combat the regressiveness of this proposal, the feds could offset this with reducing payroll taxes. The obvious downside of this is that it doesn't have the "sexiness" of the rebate (it's a behavioral finance thing) and we wouldn't see the returns immediately.

solutionyogi 17y ago
I am in agreement that this program was misplaced and complete abuse of taxpayer's money. I take public transportation to work but my taxes have been used so that someone can buy a brand new car. And why do we think that 3 billion dollars is not a lot just because Government is spending it? E.g. if Exxon waste 3 billion dollars, do you think shareholders should not complain becaue Exxon earns billions of dollars in profit? Waste is a waste, no matter how small. Also, I disagree with your alternate plan. Why do you think that taxing energy will helpful? Government will spend (and waste) all the tax money you give to them and then some. Why not propose a minimal government and minimal taxes and let the free market workout how resources should be allocated?
- mlinsey 17y ago
  To answer you last question, because we are starting with the premise that the free market does not properly price certain externalities (for example, the costs from environmental damage associated with climate change). You may not agree with this premise, in which case a debate about how to effectively encourage energy efficiency is a strange place to find yourself.
  - jhancock 17y ago
    I agree with this response. But your prior idea of an energy tax, I disagree. Instead of a tax, you could simply make it illegal to sell vehicles under a certain efficiency rating. Congress has taken this approach, sort of. The only thing wrong with it is the bills get watered down with loopholes and the efficiency numbers are too little too late.
    - sokoloff 17y ago
      What vehicles has Congress made illegal to sell based on mileage ratings? (I'm pretty sure the answer is "None, but some get slapped with a gas guzzler sur-tax.")
      - jhancock 17y ago
        The laws I'm talking about don't go into effect until 10-15 years from now. And they've been watered down. And I expect they will be watered down more by the time the due dates arrive. But the original purpose was to force better fuel efficiency, not to tax inefficiency.
    - orangecat 17y ago
      Instead of a tax, you could simply make it illegal to sell vehicles under a certain efficiency rating. That doesn't work as well. It's much better for someone who lives 50 miles from work to move 45 miles closer than to trade their Hummer for a Prius.
      - jhancock 17y ago
        How do we do that? How do you transform Houston or a Atlanta into Portland?
  - solutionyogi 17y ago
    I am not sure how you came to the premise that free market does not properly price certain externalities. And even if I were to agree with that premise, we should tax 'environmental damage', not energy usage. This way, if I use clean energy (e.g. solar power) I don't have to pay anything but if I use unclean energy, I will have to pay the price.
- steveplace 17y ago
  Ideally, the alternate plan would be revenue neutral, with the payroll tax cuts offsetting the energy tax, but it would shift our priorities when it comes to energy consumption (see Pigovian tax systems). A natural extension would be a full on sales tax (aka FairTax) but I doubt the feasibility of such a program. Another policy idea to consider was instead of MPG mandates, you pick a number for a certain class (30MPG on sedans, etc) and work on a rebate/tax system on the over/under. I feel this would be executed better on the state not federal level.
- sokoloff 17y ago
  I drive to work but my [sales] taxes have been used so that you (or the Boston equivalent of you) can have public transport available. So what? I agree that it's an abuse of taxpayer's money, but not just because I don't personally benefit from it. In fact, I have a clunker-eligible clunker-in-reality Jeep, but it is so much more financially advantageous to me to keep driving it than it would be to pay new car prices for a new car. I wanted to take advantage of the government handout, could easily have afforded any new car I wanted (even ones well over the MSRP cap for CARS program), but my judgment was that chasing the $4500 rebate would cost me 3-5x that and it wasn't worth it. THAT IMO is why it's a bad program: it encourages consumers who are marginally making it to burn up $15K in economic value over a few years in exchange for a $4500 government handout now. On one hand, that's exactly what makes the program stimulative. On the other, it's borderline preying on not-quite-poor people and their (as a class) inability to make rational economic choices in their best long-term interest. When I look around at my friends who took advantage of the program, the ones who could least afford to do so, did so, and the ones who could most afford to, chose not to...
billybob 17y ago
<blockquote>"There's a much simpler way to accomplish the same effect: tax energy."</blockquote> Yeah, but then you get all these black markets for energy. The Electricity Mafia charging protection money for the plug-your-car-in speakeasies and whatnot.
larrywright 17y ago
I have a problem with this from a strictly financial standpoint. Most people shouldn't ever buy a new car, they should always buy something a couple of years old. Cars are an expensive depreciating asset, and buying two years old lets someone else take the hit for initial depreciation. This encourages a behavior that is the wrong one for most people. I also cringe at the thought of all of those perfectly good cars being destroyed, when they might still have years of use left in them. Ridiculously wasteful. (Yes, I know that if everyone bought used, there wouldn't be enough new car purchases to provide used cars for people. But we all know that's not going to happen.)
- mmt 17y ago
  Although I generally tend to advise against buying new (and take that advice myself), I disagree with your initial assertions/assumptions. Cars aren't any more "expensive" a depreciating asset than anything else. For example, I have yet to see any evidence that they depreciate any faster than a major household appliance. I also disagree that there is, necessarily, such a thing a "initial depreciation." The big hits up front are sales taxes and agreeing to a price higher than the value. The former is an issue for used cars, too, as is the latter, though, perhaps, to a lesser extent, considering high-margin add-ons new car dealers try to sell. The spread between price and value may be even more with a used car. Specifically, with a new car, one has at least something of a lower bound for value. With a used car, the value could well be 0, though, with well published price information, one tends to have an upper bound for price. The other important aspect seems to be risk. With a new car, while it is under warranty, one has paid to avoid the risk of a sudden, expensive, mechanical failure. What I like to remind my friends is that, though this may well be the case, one is never compensated for time or inconvenience if there is a failure. With a used car, although the operating costs over the short term may be unpredictable, over the long term, it evens out. More importantly, if one chooses a reliable manufacturer, the overall risk of breakdown can be adjusted very close to zero with adequate preventative measures. All that said, I, too, am against the Clunkers program for basic economic reasons: it encourages the wanton destruction of wealth.

solutionyogi 17y ago

I am in agreement that this program was misplaced and complete abuse of taxpayer's money. I take public transportation to work but my taxes have been used so that someone can buy a brand new car. And why do we think that 3 billion dollars is not a lot just because Government is spending it? E.g. if Exxon waste 3 billion dollars, do you think shareholders should not complain becaue Exxon earns billions of dollars in profit? Waste is a waste, no matter how small. Also, I disagree with your alternate plan. Why do you think that taxing energy will helpful? Government will spend (and waste) all the tax money you give to them and then some. Why not propose a minimal government and minimal taxes and let the free market workout how resources should be allocated?

mlinsey 17y ago
To answer you last question, because we are starting with the premise that the free market does not properly price certain externalities (for example, the costs from environmental damage associated with climate change). You may not agree with this premise, in which case a debate about how to effectively encourage energy efficiency is a strange place to find yourself.
- jhancock 17y ago
  I agree with this response. But your prior idea of an energy tax, I disagree. Instead of a tax, you could simply make it illegal to sell vehicles under a certain efficiency rating. Congress has taken this approach, sort of. The only thing wrong with it is the bills get watered down with loopholes and the efficiency numbers are too little too late.
  - sokoloff 17y ago
    What vehicles has Congress made illegal to sell based on mileage ratings? (I'm pretty sure the answer is "None, but some get slapped with a gas guzzler sur-tax.")
    - jhancock 17y ago
      The laws I'm talking about don't go into effect until 10-15 years from now. And they've been watered down. And I expect they will be watered down more by the time the due dates arrive. But the original purpose was to force better fuel efficiency, not to tax inefficiency.
  - orangecat 17y ago
    Instead of a tax, you could simply make it illegal to sell vehicles under a certain efficiency rating. That doesn't work as well. It's much better for someone who lives 50 miles from work to move 45 miles closer than to trade their Hummer for a Prius.
    - jhancock 17y ago
      How do we do that? How do you transform Houston or a Atlanta into Portland?
- solutionyogi 17y ago
  I am not sure how you came to the premise that free market does not properly price certain externalities. And even if I were to agree with that premise, we should tax 'environmental damage', not energy usage. This way, if I use clean energy (e.g. solar power) I don't have to pay anything but if I use unclean energy, I will have to pay the price.
steveplace 17y ago
Ideally, the alternate plan would be revenue neutral, with the payroll tax cuts offsetting the energy tax, but it would shift our priorities when it comes to energy consumption (see Pigovian tax systems). A natural extension would be a full on sales tax (aka FairTax) but I doubt the feasibility of such a program. Another policy idea to consider was instead of MPG mandates, you pick a number for a certain class (30MPG on sedans, etc) and work on a rebate/tax system on the over/under. I feel this would be executed better on the state not federal level.
sokoloff 17y ago
I drive to work but my [sales] taxes have been used so that you (or the Boston equivalent of you) can have public transport available. So what? I agree that it's an abuse of taxpayer's money, but not just because I don't personally benefit from it. In fact, I have a clunker-eligible clunker-in-reality Jeep, but it is so much more financially advantageous to me to keep driving it than it would be to pay new car prices for a new car. I wanted to take advantage of the government handout, could easily have afforded any new car I wanted (even ones well over the MSRP cap for CARS program), but my judgment was that chasing the $4500 rebate would cost me 3-5x that and it wasn't worth it. THAT IMO is why it's a bad program: it encourages consumers who are marginally making it to burn up $15K in economic value over a few years in exchange for a $4500 government handout now. On one hand, that's exactly what makes the program stimulative. On the other, it's borderline preying on not-quite-poor people and their (as a class) inability to make rational economic choices in their best long-term interest. When I look around at my friends who took advantage of the program, the ones who could least afford to do so, did so, and the ones who could most afford to, chose not to...

billybob 17y ago

<blockquote>"There's a much simpler way to accomplish the same effect: tax energy."</blockquote> Yeah, but then you get all these black markets for energy. The Electricity Mafia charging protection money for the plug-your-car-in speakeasies and whatnot.

larrywright 17y ago

I have a problem with this from a strictly financial standpoint. Most people shouldn't ever buy a new car, they should always buy something a couple of years old. Cars are an expensive depreciating asset, and buying two years old lets someone else take the hit for initial depreciation. This encourages a behavior that is the wrong one for most people. I also cringe at the thought of all of those perfectly good cars being destroyed, when they might still have years of use left in them. Ridiculously wasteful. (Yes, I know that if everyone bought used, there wouldn't be enough new car purchases to provide used cars for people. But we all know that's not going to happen.)

mmt 17y ago
Although I generally tend to advise against buying new (and take that advice myself), I disagree with your initial assertions/assumptions. Cars aren't any more "expensive" a depreciating asset than anything else. For example, I have yet to see any evidence that they depreciate any faster than a major household appliance. I also disagree that there is, necessarily, such a thing a "initial depreciation." The big hits up front are sales taxes and agreeing to a price higher than the value. The former is an issue for used cars, too, as is the latter, though, perhaps, to a lesser extent, considering high-margin add-ons new car dealers try to sell. The spread between price and value may be even more with a used car. Specifically, with a new car, one has at least something of a lower bound for value. With a used car, the value could well be 0, though, with well published price information, one tends to have an upper bound for price. The other important aspect seems to be risk. With a new car, while it is under warranty, one has paid to avoid the risk of a sudden, expensive, mechanical failure. What I like to remind my friends is that, though this may well be the case, one is never compensated for time or inconvenience if there is a failure. With a used car, although the operating costs over the short term may be unpredictable, over the long term, it evens out. More importantly, if one chooses a reliable manufacturer, the overall risk of breakdown can be adjusted very close to zero with adequate preventative measures. All that said, I, too, am against the Clunkers program for basic economic reasons: it encourages the wanton destruction of wealth.