The Volokh Conspiracy - Is Cash for Clunkers Really Win-Win, as Representative Carnahan Says?

My wife and I are pretty conservative financially - our second car is a 1992 Honda Civic, bought used from a neighbor with 30,000 miles on it in 1998, and it now has 60,000 miles on it, because - again, part of our pretty financially conservative life style - we live walking distance to my school office. However, the car has no airbags, and with Beloved Daughter newly-driver's licensed, we would like to buy a new sedan, something that (groan) will eventually become her car. Therefore, cheap, cheap to drive, safe, and super, super reliable. Hence something like a new Honda Civic.

Along comes cash for clunkers. Having bought the fuel efficient car the first time around, I look down the list and see ... no Honda Civic! However, I just saw a video of Rep. Russ Carnahan of Missouri informing the press (but not the protesting constituents held outside the doors) that the cash for clunker program is a 'win-win.' (Midway through the video; I'm not posting the video for Dana's comments, but Carnahan's.)

(I was interested to see that the local NPR affiliate, KWMU, reported that the protestors "tried to break up the event but were kept out of the showroom." Looking at the video, I couldn't see any evidence that the protestors tried to break it up, and they left the showroom as requested. If someone at KWMU wanted to offer the factual basis for the preceding sentence, I'd be interested.)

I am trying to figure out how it is a win for me, in anything other than an abstract social goodness sense. I don't get a financial benefit of $4500 on turning in my car - which, in buying a Honda Civic, is far from minor - because I was prudent and good enough to think about gas mileage rather than simply buying the SUV monstrosities that the other families in our neighborhood were snapping up.

In addition, it seems to me possible - more than possible - that the price of that new Honda Civic is going to be more than it otherwise would be, because a government cash subsidy to the person who made the socially wrong decisions in past years will support the price of that new Honda Civic at something higher than it otherwise would be. Which I will pay, without any offsetting subsidy. Hmm. If this sounds whining, well, I am, because I have this feeling that my wife's and my very middle class financial prudence is, once again, getting played for a sucker.

But okay, past the whining, here's my question. Can you devise a way in which the program could accomplish its goals - and I'm not in principle opposed to getting clunkers off the road - without requiring that the prudent once again subsidize the imprudent?

If you want to explain to me how this is not merely a subsidy supported by the whole or, worse, a transfer from the prudent to the imprudent, I'm open to explanation and if persuaded I'll quit whining. But it does seem to me that not only don't I get a cash benefit that other people get as a reward for what, on the Congress's apparent view of things, are their anti-social buying habits - I'm going to pay a higher price for the new car than I otherwise would. If that's not correct, please explain to me why not. Or, if it is, tell me how the program might be revised to avoid these bad outcomes, or else why it is not possible.

	[Kenneth Anderson, August 5, 2009 at 6:26pm] Trackbacks Is Cash for Clunkers Really Win-Win, as Representative Carnahan Says? My wife and I are pretty conservative financially - our second car is a 1992 Honda Civic, bought used from a neighbor with 30,000 miles on it in 1998, and it now has 60,000 miles on it, because - again, part of our pretty financially conservative life style - we live walking distance to my school office. However, the car has no airbags, and with Beloved Daughter newly-driver's licensed, we would like to buy a new sedan, something that (groan) will eventually become her car. Therefore, cheap, cheap to drive, safe, and super, super reliable. Hence something like a new Honda Civic. Along comes cash for clunkers. Having bought the fuel efficient car the first time around, I look down the list and see ... no Honda Civic! However, I just saw a video of Rep. Russ Carnahan of Missouri informing the press (but not the protesting constituents held outside the doors) that the cash for clunker program is a 'win-win.' (Midway through the video; I'm not posting the video for Dana's comments, but Carnahan's.) (I was interested to see that the local NPR affiliate, KWMU, reported that the protestors "tried to break up the event but were kept out of the showroom." Looking at the video, I couldn't see any evidence that the protestors tried to break it up, and they left the showroom as requested. If someone at KWMU wanted to offer the factual basis for the preceding sentence, I'd be interested.) I am trying to figure out how it is a win for me, in anything other than an abstract social goodness sense. I don't get a financial benefit of $4500 on turning in my car - which, in buying a Honda Civic, is far from minor - because I was prudent and good enough to think about gas mileage rather than simply buying the SUV monstrosities that the other families in our neighborhood were snapping up. In addition, it seems to me possible - more than possible - that the price of that new Honda Civic is going to be more than it otherwise would be, because a government cash subsidy to the person who made the socially wrong decisions in past years will support the price of that new Honda Civic at something higher than it otherwise would be. Which I will pay, without any offsetting subsidy. Hmm. If this sounds whining, well, I am, because I have this feeling that my wife's and my very middle class financial prudence is, once again, getting played for a sucker. But okay, past the whining, here's my question. Can you devise a way in which the program could accomplish its goals - and I'm not in principle opposed to getting clunkers off the road - without requiring that the prudent once again subsidize the imprudent? If you want to explain to me how this is not merely a subsidy supported by the whole or, worse, a transfer from the prudent to the imprudent, I'm open to explanation and if persuaded I'll quit whining. But it does seem to me that not only don't I get a cash benefit that other people get as a reward for what, on the Congress's apparent view of things, are their anti-social buying habits - I'm going to pay a higher price for the new car than I otherwise would. If that's not correct, please explain to me why not. Or, if it is, tell me how the program might be revised to avoid these bad outcomes, or else why it is not possible.