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8 Reasons Why Cash for Clunkers is a Bad Idea

The government's "Cash for Clunkers" Program may seem like a good idea to stimulate the economy and bolster car manufacturers who are all experiencing a major slump in sales. However, this "Cash for Clunkers" Program has several negative effects that make this program another bad idea from ignorant politicians. Here are 8 reasons why the "Cash for Clunkers" Program is a bad idea.

First, the "Cash for Clunkers" Program is only a short-term increase in car sales. Since car manufactures are sitting on a glut of new cars, this program will only decrease inventory levels and provide needed cash to struggling car manufacturers. This does not mean that car manufacturers will resume building more cars at the pre-recession rate, thus the decline in employment in the car manufacturing business will not improve. Without the creation of new jobs, the "Cash for Clunkers" Program does not have any long-term benefits to the average person or to the overall economy.

Second, the United States Government is using tax money and/or borrowing more money for the "Cash for Clunkers" Program. An increase in taxes is not going to stimulate the economy. Actually, it probably will have the opposite effect. And borrowing more money from other countries is only going to hurt the U.S. more in the long-term (Are you noticing a trend yet?). Finally, most of this money is going to end up in the hands of people and companies (who are mostly foreign too) who are already wealthy, thus they do not need to be subsidized by the American people.

Third, the United States is destroying a large number of perfectly functioning automobiles that cost up to $4,500. The government is basically harming the used car market. A lot of people are unable to afford a new car, even with the "Cash for Clunkers" Program in affect. Furthermore, this program is increasing the cost of old cars by decreasing the supply of old cars that dealerships would normally have. Therefore, the people who need the most financial help are being hurt the most.

Fourth, another way of looking at this issue is that people who would have normally purchase a used car are now more likely to purchase a new car. This is a new car that the purchaser might not be able to afford the monthly payments on. Again, this program is increasing the risks to both borrowers and creditors. Again, this could harm the economy even more in the long-term.

Fifth, this program is an incentive for people to trade in their perfectly working cars earlier than they normally would have. As a result, this puts people more in debt or at least sooner in debt when purchasing a new car, instead of waiting until a time they could better afford a new vehicle. This may help banks that lend money, but this hurts the average person.

Sixth, the environmental impact of the "Cash for Clunkers" Program is questionable. As a self proclaimed environmentalist, this statement may seem a bit odd. First, new cars will only have a marginal benefit in miles per gallon when compared to older cars. Second, when taking into account the cost to recycle a perfectly working car, the environmental benefits is less than just the miles per gallon gain the new car owner experiences. Third and finally, the amount of energy and resources to build a new car that would have been normally sold years later increases the environmental impact too, especially since future cars will be even more environmentally friendly than today's new cars. As a result, the environmental benefits of the "Cash for Clunkers" Program are dubious at best.

Seventh, the government is rewarding people who made bad decisions when buying big gas guzzlers in the first place. People need to take ownership of their bad decisions.

Finally, the lesson that the government is teaching is that the best way to get out of the recession is to consume more instead of saving more. At a time when jobs are difficult to attain and keep, this does not seem like a good idea to me.

After reading this article, I think you will find that the "Cash for Clunkers" Program is not as a good idea as it may first appear. Actually, it may be a very bad idea.

by Phil for Humanity
on 08/02/2009

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