Wednesday, August 5, 2009

Destructive destruction

I haven’t thought much about the Cash for Clunkers program. I knew it was designed to reduce carbon dioxide levels by getting older, less fuel efficient cars off the road while simultaneously stimulating the automobile industry. I certainly understood why neoneocon felt she was getting the short end of the stick - again - for having prudently bought a high-mileage car while all those who bought gas guzzlers were being rewarded for their feckless behavior. (Although, as my husband pointed out, she’s been able to laugh every time she sailed past a gas station for lo, these many years.) Still, beyond that it didn’t really register. Our car doesn’t qualify and besides we certainly don’t want to get rid of it.

Now the program has been so successful it’s running out of money and the Administration wants the Congress to cough up some more. This time around I’m seeing articles about how the government is destroying the cars so that not even their spare parts can be used which means that not only will cheap used cars for poor people and students be harder to find, cheap spare parts to keep such cars running will be more expensive. Fair enough but I still couldn’t get too worked up about it. In the context of all the money the government is spending on projects I find useless at best, Cash for Clunkers seemed like a drop in the bucket.

Then I read the Wikipedia entry on Cash for Clunkers, looking to see if there is a requirement that the new cars bought under the program must be from an American company. (There isn’t.) While wandering through the entry I ran across this description of what is done to the cars that are traded in:

To ensure that vehicles traded-in under "Cash For Clunkers" will not be resold by dealers, the program outlines a procedure for destructively disabling the engine (and thus also precluding the possibility that any mechanical engine components might be salvaged to be used in the repair of any other vehicles): the oil is drained and replaced with a sodium silicate solution, and the engine is then started and run until the solution, becoming glass-like when heated, causes engine internals to abrade and ultimately seize. In addition, the salvage or scrap facility which acquires the vehicle cannot sell any powertrain components from the scrap vehicle. This includes the disabled engine (most specifically the long block components), the transmission/transaxle, and in some cases the axle assemblies. The salvage or scrap facility can sell any other component from the scrap vehicle until they are ready to crush and/or shred the vehicle. The salvage or scrap facility has 180 days to ultimately crush and/or shred the vehicle.


Reading what is actually being done made me realize how terribly sad this program is. We’re a nation deliberately destroying its own wealth. What sane society does this?

9 comments:

Jack Reidy said...

Hi Elise,

I had my hopes up about getting a new car through the Cash for Clunkers program and so I have been following this for the past few months. But unfortunately although the backers of the program started out with good intentions, the program morphed into something that was a stimulus but otherwise made little sense.

I was thinking of doing a blog post on this but just haven't gotten around to it. My blog is at
http://www.jackreidy.com/blog/

It would seem reasonable to me to recycle the engine and powertrain. Generally recycling is a good thing but I suppose there is an argument to be made that removing a gas guzzler is better. I guess someone needs to do a pretty good analysis on this before we can say.

It would seem reasonable to not disqualify buyers because they own cars that got reasonable mileage (> 17) when new (which might have been 10 - 20 years ago). It would seem reasonable not to have looser standard for trucks (and SUVs) than cars.

By the way, I should mention that I was disqualified because my clunker got good mileage in 1992. I have no idea what it gets now but that doesn't matter and I can't think of a good way for the government to reliably check that.

It would make much more sense to include someone with a car getting 19 miles per gallon who wants to buy one that gets 30 than someone who has a car getting 17 mpg who wants to buy one getting 22 mpg (or a truck with a lower increment).

As far as the stimulus part of it. I think the rebate was too high. After all they had more takers in 4 days than they thought they would have in months. I suspect that if the rebate was smaller per car, we would have had much more stimulus for the same amount of taxpayer money.

Maybe they'll do better in the second round but I doubt it.

Jack

WLindsayWheeler said...

I would like to point out a comment over at Tigerhawk blog that made a very good point:
"We are encouraging people to get car loans, more expensive insurance and more expensive maintenance on something they really didn't need." by JPMcT. What this is that people who were not in debt or just finishing their debt load were now tempted to go back into debt. It was about snookering people all across the land to take out loans from banks thus giving banks new streams of income whereas these people would have been saving money.

We are going into a depression that is bigger than the Great Depression. It's going to get real bad. And these people were fooled into getting into debt when prudence would counsel saftey and security thru saving.

This is about political correctness; about ideology running economics. It is about salving the concerns of Al Gore than it is about true economics.

This program has increased in the long term tremendous debt and financial burden upon these people. This plan is awful.

Elise said...

Jack, those are all interesting points to ponder if you start out with the belief that deliberately destroying wealth can ever possibly be a good idea. I don't.

However, if you're looking for an interesting hook for a post, how about reviewing what the Transportation department is saying about how many cars were traded in and what the average gas mileage difference was (The Corner has this up), figuring out how much CO2 that will save, and then comparing that to the carbon footprint required to manufacture all those replacement cars?

Elise said...

WLW - As in my response to Jack, I think you make good points but to me they pale beside the insanity of deliberately destroying wealth regardless of any other costs.

More generally, though, I agree to a large extent with your point about debt. I said back in November that we needed to realize we'd dug ourselves a huge hole of debt and accept that it would take time to get out of it rather than trying to "fool" the economy with more debt. Additional debt (I foresaw government debt rather than private) would delay the crisis while making it even worse when it finally did hit. Not to mention that we'd be trying to dump it on our kids and grandkids instead of taking our lumps ourselves.

Grim said...

You could call it destruction of wealth, but that overlooks the fact that we are spending our wealth one way or the other. This program mostly transfers the expense of our wealth to allied states.

For example, we are transferring wealth to Japan (assuming you buy a Japanese car), or South Korea; but the increased fuel efficiency blocks a transfer of American wealth to Saudi Arabia or Venezuela or Iran.

In lieu of that, you're keeping the "wealth" in the form of the car, which means Japan or South Korea don't get your money. But you're buying as much as twice as much gas per family, which means Venezuela or Saudi Arabia gets that much more.

Elise said...

I can't quite wrap my mind around that argument, Grim. To me it seems like a farmer who has a field of feed corn ready to be harvested. The government rips it all up, throws it into the landfill, and pays the farmer $4500. The farmer will now spend his money at the feed store rather than having to buy diesel for his combine to get the corn harvested. We can consider this a good thing if the feed store is friendlier to the farmer than the gas station but it still ignores the inherent value of the corn.

Something about this is rattling around in my brain but I'm darned if I know what. The only thought that keeps popping to the surface is an image of my grandmother carefully saving waxed paper and aluminum foil.

Grim said...

"The only thought that keeps popping to the surface is an image of my grandmother carefully saving waxed paper and aluminum foil."

Quite right; I do that myself.

Armies don't, though. I anticipate that we're going to leave a large number of our hummers in Iraq when we finally go; and billions of dollars worth of concrete T-walls; and a host of other things we've built, with our wealth, because it's cheaper to leave them (and build new ones, lacking the wear of war, if we need them) than to move them.

In logic there is -- I'm sure you know -- the 'Fallacy of Composition.' My old socialist professor was big on it, the fellow I was praising the other day.

The fallacy takes the form of an argument that 'a thing that is true at one level of organization is true at all levels of organization.' This seems to us that it should be so: it's why you hear that government's finances should be run like a family's or a business'.

Well, those are two ways of organizing people and money; but they have different ideal modes of finance. A family should try to avoid debt, and balance its finances towards savings and wealth creation. A business may at times go whole-hog into debt, in order to eventually boom with wealth creation.

A government really doesn't need to create wealth at all. In fact, it shouldn't: it should ideally have a small surplus to use in hard times on emergency relief, but in normal times it should operate close to balance. That way, it isn't stealing... er, taxing more than is absolutely necessary.

I think my old professor would say that fallacy may be operating here. A family should have a strong tilt toward savings, reuse, care of resources. A nation may have good reasons not to do so. The principle, very sound at one level of organization, may not always be the wisest for a whole nation at once.

Not, mind you, that I approve of this particular program. I'm just advocating a different way of thinking about the problem, more for the pleasure of the philosophy than to change your mind about the program.

Elise said...

I have no objection to the army leaving materiel behind in Iraq because moving them is too expensive. If you tell me we're going to deliberately destroy those items so the Iraqis get no good from them, I'd have a problem with that. (Although I do understand the idea of destroying materiel left behind if the enemy is who would be using it.)

I'm not convinced families and businesses are necessarily that different in terms of debt. Just as it might make sense for a business to go into debt in order to eventually be better off so it might make sense for a family to go into debt to, for example, provide a college education for a family member who can then make the whole family better off.

I will grant that a nation may have good reason not to reuse resources. To me, though, that's still different from deliberately deciding to destroy those resources.

I did find pondering the philosophy pleasurable although you did not, in fact, change my mind.

Grim said...

You know, I was never able to be convinced by an argument based on the fallacy of composition either. I'm not sure it's a real fallacy at all, which is why I wanted to try it out on you. :) You raise precisely the same objections that I normally did, when he tried it on me.

It may be that people are people, at any level of organization.