Friday, July 31, 2009

Back Door Auto Bailout

Questions: Is marketing part of the Poly Sci degree program? Because it seems like everything congress is doing these days has to have some kind of spin so it can be "sold" to the public. Any advertising agency can come up with a marketing campaign that distracts you from the product's flaws. So let's start calling these government stimulus programs what the really are, back door bailouts.

Cash for Clunkers is a prime example, on the surface it seems great. Here's the sales pitch. You qualify if your car has been own and insured by you for at least a year. If the car you buy improves your mpg to between 4 an 10 mpg then you can qualify for $3500 and if you improved your mpg by 10 or more than you qualify for $4500. Woo Hoo!!! I am liking it, but what's the catch?

Well, the program was funded with $1,000,000,000 in tax payer money. So let's sharpen the pencil and do some math: 1,000,000,000/$3500 (rounding down to the nearest thousands) = 285,000. So congress figured they would be helping the environment and cutting gas consumption by removing 285,000 "clunkers" from the road. Correct me if I am wrong, but didn't we have 110,000,000 (from memory) people vote in the last election and I assume many of them drive. O.k. time for some more math 285,000/110,000,000 = .25%. Amazing. You know "they" say every little bit helps.

Here is a real life comentary on the whole Cash for Clunker from the NY Times:

For dealers, the confusion continues. Adam Lee, a co-owner of Lee Auto Malls, one of the largest car dealerships in Maine, told Green Inc. in an e-mail message this morning that “we are having all sorts of problems.”

In Mr. Lee’s description:

1. We have not had one application accepted without it being rejected numerous times.

2. We have 9 people at 5 dealerships working full time on this, it should take one person.

3. We have over 100 waiting to be paid and have not been paid on one yet.

4. They changed the rules part way through.

5. It is a mess.

“Having said that,” Mr. Lee continued, “it is having an incredible impact on business. I love the program, but they are so out of their league. They should have had someone else administer the program.”

In a follow-up telephone interview, Mr. Lee also said that the environmental benefits — a driving force behind the creation of the program — were for many customers merely a side benefit. Most people, he said, just wanted to get a good deal when they exchanged an old car for a new one.

“I don’t think that I could say that demand has exploded for the Prius because of this,” Mr. Lee said.

He also argued that if the program could have been structured to do much more for the environment, by allowing people whose cars get 22 miles per gallon or less (rather than the current limit of 18) to trade them in. Also, he said, the minimum mileage for new vehicles could have been higher — say, 28 miles per gallon (above the current 22).

“Right now you can get $3,500 for increasing your fuel economy from 18 to 22,” Mr. Lee said. “Well, that stinks.”

Now, let's give congress the benefit of the doubt. They are just trying to help the economy and create jobs. So the average of 2 people/dealership dedicated to just process the "clunker" applications, that's pretty good right? Provided they keep the job after the program is over. hhhhmmmm. I am really starting to wonder if congress read this bill or even had time to do the math. Wait, I know! The car dealerships, that's it. The manufactures got their bailout, so it was time to bail out the dealerships. Very, very clever. The only "mistake" really made was under estimating how fast the money would be use, because I don't really know that many people who would want to take $3500 from the government. Do you?

So, today congress approved another $2,000,000,000 of tax payer money to fund more cars because the program is such a "success". That means another, 570,000 cars will be taken off the road. Yep, that is awesome can't wait for congress to get a hold of our health care system.

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