Debt For Suckers Government Plan – Did It Work?
When the Cash for Clunkers program launched I could not believe the people that enthusiastically lined up at dealerships to receive their shackles. The feeling across the nation was that this was a good program that was going to help people. Help people go into debt during an out of control economy maybe, but help people it did not. I just could not comprehend such poor judgment in the minds of the very people complaining about record unemployment, rising interest rates, and a rising number of foreclosures.
It just proves that marketing is effective, or at least that people just need to feel like they are getting something for nothing. The problem is that what they got, besides a fresh new car smell, was a steaming pile of new debt. The money was printed out of thin air, which means that not only did the people go into debt for a new car but they went into debt for a new car at their children’s expense. Yes, it will be our children that will be paying for all those generous handouts of our future tax dollars.
The question that some had, including myself, was would this program do what it claimed it would do? Other than supposedly saving people money on gas by trading in a car that got only 2 or 3 less miles per gallon, I don’t see what the benefit was. I can hear it now. “I went $20,000-$30,000 in debt but I am getting 3 more miles per gallon! WOOOO HOOOO!” So did the program work?
After finding this article on AOL, it would appear that it did not do anything but cause more stress. If you have ever made a significant purchase that you were unsure of, then you know of the term “buyers remorse”. According to a CNW Research of Bandon Oregon survey, 6-8% of new car buyers wished they wouldn’t have done it. That could just mean that the rest are still in denial. The average loan length was 49 months and the average monthly payment was $317. So during this increasingly volatile economic collapse, people thought it was a good idea to add $20,000-$30,000 in new debt to their liability column.
The report suggested that any benefit would likely be offset by reducing a families ability to pay down credit card debt, limit home improvement, as well as put a damper on non-targeted future savings. One-fifth of the buyers surveyed admitted that the the money used for paying for the car came from funds that would have been used in one of those three categories. According to the U.S. Congress’s Joint Economic Committee, consumer debt has reached $950 billion—most of which is credit card debt and does not include mortgage debt. WOW! The goal should be to lower that number but I digress.
The survey concluded that the money thought to have been saved on fuel, was not all it was cracked up to be. It suggests that people who might not have taken a long trip in their older car, would not hesitate to in the newer, more reliable car. The estimated fuel usage was almost double that of the clunker that was turned in.
“The approximately 700,000 total vehicles moved under the program will therefore use an additional 42 million gallons of fuel annually during the first years of ownership.” – William Jeanes, AOL Autos
I don’t know about you, but that looks like Government math to me. Just as I originally, and appropriately classified this program as Debt For Suckers, I think this survey proves that things aren’t always what they appear—especially when connected to the Government. With the National Debt reaching almost 12 trillion dollars, the government has proven that it is not the sharpest knife in the drawer when it comes to finances. Perhaps you should consider the source next time Washington claims to have the perfect solution to the financial crisis, or for your lives.
Lesson To Be, Or Not To Be Learned, That Is The Question!
Don’t take financial advice from broke people—a.k.a. the Government.
Today, at the Self Reliance Exchange:
Pay Off Debt – Do It Yourself – by Brad Chaffee
I have been against the program since launch and wrote about it twice on my site and I agree with your points here. The Govt telling you to get a new car shouldn’t make you do it! If you’re already on the market for a new car, sure its nice to get a bonus, but seriously, just because you are getting a “rebate” doesn’t make the debt any less of a burden. This is just like the employee pricing BS the car dealerships pull every year..
It may have not done anything for people individually, but it did two things that needed to happen. It begins a process of getting people into more fuel efficient transportation which will lessen our dependence of foreign oil and it helped to give the automobile industry a little more time to get their act together without having even more layoffs.
Some transactions may have resulted in only a 3 mpg savings, but others resulted in savings that were much more significant. Multiply this by several hundred thousand and indeed it’s a an effect.
Some of the thoughts expressed here and elsewhere reflect this country’s turn towards a “What about me?” society where the only (or primary) concern is yourself. United we stand, individualized we will surely fail.
Jim, I appreciate your comments, thank you. For the record I am definitely for better fuel efficiency, as is the case whenever I buy a vehicle. I try to buy cars that get good gas mileage but I do not think that teasing a country into DEBT SLAVERY is a productive solution. It may seem like it now to you but if you remember correctly debt is the very reason our economy slipped into failure in the first place. If people can’t pay their bills then they certainly can’t “stimulate” the economy. I am also not sure how it can be said that this program will help us lessen our dependence on foreign oil, especially if reports indicate that people will be using more fuel than before because they are now more confident in their rides ability to get them further.
I am not real sure what you mean by the “What about me?” remark. I don’t think that me being okay with people going even further into debt will help my country as a whole. “What about me?” I just don’t understand what you are referring to there.
A recent article in the WSJ had a really good analogy about what was inherently wrong with this program:
“You can’t increase the standard of living by purposely breaking windows then paying someone to fix them.”
..or something along those lines.
I wholeheartedly agree with your views on this Brad.