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How Charitable is ‘Cash for Clunkers’?

Posted by Larry Doyle on August 7, 2009 11:09 AM |

With the Senate’s approval of another $2 billion in funding for the ‘Cash for Clunkers’ program, the automotive industry will breathe a sigh of relief. I have nothing against the automotive industry, but there are aspects of this program that I find disconcerting both in style and substance.

While economists purport that this program will add measurably to next quarter’s GDP report, I would question the true integrity of that assessment. Why? GDP measures:

the monetary value of all the finished goods and services produced within a country’s borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.

Others have already put forth that the Clunkers program is merely accelerating demand. I concur, but will grant that a spark within the automotive sector may help generate benefits across other parts of our economy.

Are consumers increasing debt and redirecting purchasing power that may have gone elsewhere given the presence of this program? I guess we could make that case with a purchase made on credit at any point in the economic cycle.

My main issues with this program revolve around the requirement that cars being swapped are required to be destroyed. Certainly not all of those cars are worthless. Shouldn’t the implicit value of cars being destroyed be subtracted from GDP if we want to have real integrity in our economic measurements? Why? If goods being produced, in this case autos, are predicated on others being destroyed then it only makes sense to net the values of the autos.

My biggest issue with this program, however, centers on the fact that there is real value being destroyed via this program. Why couldn’t or shouldn’t the cars being swapped be provided to worthy charities? I saw this point raised early this morning and it hit me: how many charities would love to have these vehicles in order to do their work? In fact, how many of these vehicles would have gone to these charities if not for this program?

Not sure if it was divine intervention, but I received an e-mail later this morning from the Charity Assistance team at Donate Car USA addressing this topic.

I would strongly encourage anybody who may be interested in the ‘Cash for Clunkers’ program to review the costs and benefits of donating your vehicle. ‘Cash for Clunkers’ may very well have an immediate negative impact on charities who depend on car donations. Ultimately, I hope this program will actually raise the awareness of donating vehicles versus destroying them.

Let’s not forget those in need.

LD

  • Moy

    “Shouldn’t the implicit value of cars being destroyed be subtracted from GDP if we want to have real integrity in our economic measurements?”
    I guess what you are talking here is about NDP which is GDP-depreciation.
    There may be 2 possible reasons why the swapped cars are not being sent to charities:

    1. Sending the cars to charities won’t decrease pollution which is one of the objectives of the US govt.

    2.The cars sent to charities may find their way back to the second hand car markets and hence drive down prices in the second hand market, effectively reducing demand for new cars, while increasing demand for new cars is the other fundamental objective of the program.

  • Sunnybearandpud

    From an e-mail sent to my attention concerning a video to watch on YouTube “Glen Beck…Cash for Clunkers.
    Individuals without reading may click on through the Privacy Act Security Statement without realizing what they are giving up. This is not your normal Privacy Act Security Statement. If you proceed forward, you have given the Federal Government permission to own your computer and everything within. This also gives permission to all other domestic and foreign agencies as well.

  • Moy

    Sunnybearandpud

    What do you mean?

    • sunnybearandpud

      First, I apologize for not explaining well. This concerns the Cash for Clunkers Program and the site cars.gov.

      “Glenn Beck / cars.gov”
      http://www.youtube.com/watch?v=bWs12cc

      Some individual may disregard the Privacy Security Act Statement as the everyday run of the mill statement and click on through agreeing to the Privacy Security Act statement.

      This Privacy Security Act Statement states:
      This application provides access to the DOT Cars system. When logged on to the Cars system, your computer is considered a Federal Computer system and is the property of the U.S. Government.
      Any or all uses of this system and all files on this system may be intercepted monitored, recorded, copied, audited, inspected and disclosed to authorized CARS, DOT, and Law enforcement personnel, as well as authorized officials of other agencies, both domestic and foreign.

  • Cash for clunkers is hurting charity car donation since many of the cars being turned in for a voucher would have been donated to charity. These c4c cars are being destroyed instead of either being given to the needy or sold with the proceeds being used to fund the mission of the charity.

  • Jan

    People who care about charity should give cars that do not use massive amounts of fuel and do not pollute the environment. Cash4clunkers can be seen as charity since it helps people getting out of a bad deal which they otherwise would be stuck in. I think the government has the balance perfectly right here.

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