Kurt Brouwer August 20th, 2009
In a post on the Cash for Clunkers program, I joked about a similar program for appliances. But, I should not have joked because such a program was included in the economic stimulus program passed earlier this year. CNBC reports [emphasis added]:
Dollars for Dishwashers? Appliance Rebates on the Way (CNBC, August 20, 2009, Christina Cheddar Berk)
…The government’s so-called “Cash for Clunkers” program has been grabbing headlines, but it’s not the only federal program putting money back into consumers’ pockets. A new government program is poised to help appliance manufacturers the same way “Clunkers” gave a jump start to auto manufacturers.
As part of the Obama Administration’s economic stimulus bill, nearly $300 million was set aside to fund a state-run rebate program for consumers purchases of Energy Star-qualified home appliances.
Like the “Clunkers” program, the plan takes aim at energy guzzlers. However, unlike in the popular auto program, consumers will not have to turn in their old appliances in order to buy a more efficient one and qualify for the rebate. However, the exact criteria remain unclear because states are still drafting their individual plans, with the hope of having the programs up and running by the end of this year…
Great line that says so much, ‘…the exact criteria remain unclear…’ It really is impossible to parody Congress anymore. And, of course, the fact that Cash for Clunkers has been a fiasco will not stop implementation of Dollars for Dishwashers. After all, Cash for Clunkers has only set a new land speed record for a failed government program [emphasis added below]:
NY dealers pull out of clunkers program (Breitbart / AP, August 19, 2009, Dan Strumpf)
Hundreds of auto dealers in the New York area have withdrawn from the government's Cash for Clunkers program, citing delays in getting reimbursed by the government, a dealership group said Wednesday.
"¦The program offers up to $4,500 to shoppers who trade in vehicles getting 18 mpg or less for a more fuel-efficient car or truck. Dealers pay the rebates out of pocket, then must wait to be reimbursed by the government. But administrative snags and heavy paperwork have created a backlog of unpaid claims. Schienberg said the group's dealers have been repaid for only about 2 percent of the clunkers deals they've made so far.
Many dealers have said they are worried they won't get repaid at all, while others have waited so long to get reimbursed they don't have the cash to fund any more rebates, Schienberg said"¦
Cash flow. It's an exciting new concept. Apparently, the bureaucrats in DC are unfamiliar with it though. On the other hand, maybe they get it. Improving cash flow means slowing down the checks you write. Here's another example from New Mexico:
Dealers Stiffed As Clunkers Pile Up (KRQE News, August 20, 2009, Alex Tomin)
Some New Mexico auto dealers have backed out of the cash-for-clunkers program and more may do so as the federal government takes its time providing cash reimbursements.
Dealers across the state are owed more than $3.6 million, according to a dealers' group which says that so far Uncle Sam has only written three checks totaling about $14,000.
Cash for clunkers"“officially its the Car Allowance Rebate System"“allows consumers to trade their gas guzzlers for a more fuel-efficient rides while earning up to $4,500 toward the purchase price.
Dealerships put up the cash for the rebates after being told by the Obama administration they would be paid back within 10 days of the sale.
With that much cash in limbo they've called in reinforcements.
"You simply can't ask businesses to front $200,000, $300,000 for any period of time," Rep. Martin Heinrich, D-N.M., told KRQE News 13. "These applications are simply not being processed fast enough.
"So we are going to be on the phone today to the White House and to the feds in DC to try and get this moving."
Don Chalmers' dealership received the most reimbursement so far.
"I pay my bills," Chalmers said. "If I was three weeks or four weeks late on paying my taxes I suspect that they would be in my office real quick"¦
The so-called Cash for Clunkers program has been an eye opener for many people because it illustrates the many problems with government programs. And, it has done this in a very short time span, so Americans have seen firsthand how it has gone off the road.
What’s wrong with government rebate programs?
They don’t work as advertised. They are bad economics. And, they waste taxpayer money.
Let’s look at Cash for Clunkers as the poster child for how not to do things. The original Cash for Clunkers authorization was for $1 billion. The program has already - in a couple of weeks - run through that $1 billion. Did that stop anyone? Not at all. An additional $2 billion was quickly authorized.
First, Congress and its actions are frequently based on political opportunism and crackpot economics. Next, the regulations are absurdly complicated. Also, in crafting this legislation, Congress devoted little or no effort to find out what happened to similar programs in other states or countries. And, the very folks who created the program seem to be surprised at the strong public demand for government giveaways. Finally, the solution is, as always, give away more money. And, as we saw above, the program is rife with mismanagement such that retailers end up holding the bag.
What could be more perfect as an example of how not to do something. The liberal-leaning economics blog, Econbrowser, made these points about Cash for Clunkers and the disturbing historical parallels to failed programs from the Great Depression [emphasis added]:
Cash for Clunkers (Econbrowser.com, August 2, 2009, Professor James Hamilton)
A victim of its own success?
One of the more embarrassing features of the New Deal was the Agricultural Adjustment Act of 1933, which paid farmers to slaughter livestock and plow up good crops, as if destroying useful goods could somehow make the nation wealthier. And yet here we are again, with the cash for clunkers program insisting that working vehicles must be junked to qualify for the subsidy. Economist Mom laments the tragedy and waste, as only an economist and mother could:
I don’t think I can do it…. I mean, look at all the time and money (and love) I’ve poured into the (already) old beagle I adopted almost two years ago. It just seems very wasteful (and somehow “heartless”, even with a car) to prematurely end a “life” that still could be valuable to someone- doesn’t it?
But, why stop with Dollars for Dishwashers? How about Stimulus for Students? Parents could get government cash to take their children out of underperforming schools and put them into better schools? No? Okay, how about Cash for Congressmen? Voters could get rebates to use towards funding a more responsive Congressional representative.
Or, how about Funding for Freezers? It’s a two-fer. We could combine a rebate for an appliance along with Funding for Food. Consumers could get a brand new energy efficient freezer and funding for government-approved food to fill it up. I mean the possibilities are endless.
For more on how unwise all this is, see Government: It ain't broken yet, but just wait and Collateral Damage From Cash for Clunkers.
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