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Car subsidies: What works, what fails

  • Source: Gasgoo.com
  • [14:45 August 26 2009]
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China has turned into the world's largest auto market, the United States resoundingly lost this coveted title this year.

America belatedly started their own cash for clunkers program in July. Just 55 days later, the program is being terminated on Monday, August 24, "by close of business.". America may have lost the title of the world's largest auto market.

But they definitely hold the record for the shortest and most confused car stimulus program in modern history. Originally funded with just $1 billion, the program was such a success that funding needed to be raised to $3 billion.

According to a US government news release, the program helped fund "more than 457,000 dealer transactions worth $1.9 billion in rebates." (Remember: Germany, a country with one quarter of America's population funded 1.9 million cars so far.)

The short-lived US program is an administrative disaster. A Department Of Transportation document states that the DOT has only approved $140 million so far out of the $1.9 billion in applications.

The government document illustrates the state of confusion. In the first paragraph, it states that the program "helped tens of thousands of consumers purchase new more fuel efficient vehicles." Further down, it says that "more than 450,000 transactions have been submitted by dealers, representing a total of about $1.9 billion."

Why was the program stopped when there is still a billion dollars in funding in the budget?

The DOT figures that from Thursday through Monday evening, "the program will be able to continue to accept new submissions … consistent with the statutory authority of the program." Translation: Until the money will run out. That would be another 260000 cars in one week-end. Not quite likely.

The best guess is that the program was such an overwhelming success that the Department Of Transportation was overwhelmed and had to pull the emergency brake.

The Wall Street Journal says that "the program has proven to be an administrative fiasco, as the central planners at Transportation vastly underestimated how many people would apply." The WSJ comes to the damning conclusion that "the feds can't even give away money very well."

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