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Cash For Clunkers: The Bailout Continues


I was thinking about this bill, and I got to thinking that it was quite odd that such a bill contained a clause to limit the trade in of older automobiles to the birthdate of 1984 or later.  This seemed a curious distinction to make, and I dug a little into the past of the bill, and commentaries on it.  I hope that my analysis offers a slightly different twist to some of the very well written and researched commentaries about this bill.  I thank all of those countless websites, not all of whom will be mentioned below.  I am sorry for any omissions.

The first fact to be discussed is that the original bill was whittled down to 1984 and later by specialized parts lobbyists.  To keep a market for specialty automobile parts, for people who will in all likelihood never finish the projects that this market creates for them.  What percentage of people who get involved in "restoring" a classic automobile get caught in the perpetually skyrocketing cost of the project?  I’ve known more than one.  The market must be overly lucrative for lobbying efforts to even be conducted, never mind successfully.  This is the Washington way.  The very fact that we consider ourselves to be a "free market" economy combined with a democratic form of government raises serious issues, issues that speak to the core of the problems of today’s society.  The "free market" ideology seems to be coming apart at the seams, yet the tattered rags of socialism, and those pesky bloodstains that won’t come out, aren’t ready to be donned just yet.  Has the left not formulated an alternative to the "free market" that would be suitable?  Why not?

First, I want to clarify something.  In what sense is this market "free"?  In the same sense that money is equated to freedom.  Think of election reform opposition, which is basically claiming that money equals free speech.  Any society which grounds its ideas of freedom in a market that is alleged to be free is surely in the grips of some severe ideological voodoo.  Especially when that same argument is used to ground political freedoms.  We’re all free to compete in a market in which some are already more free than others.  It defies logic that the Cash For Clunkers bill would even be considered, much less passed, with a minimum age requirement.  This minimum age requirement coincidentally coincides with the "antique car" threshold.  Many of these cars never see much road time, it is true.  Overall, however, they represent a disavowal of the standards of the act, which are oriented around miles per gallon.  Also, any disincentive for particular automobiles limits the spirit of the act, which is to help the average person unload an automobile and in turn stimulate the economy through automobile sales.

To stimulate the economy through automobile sales is itself a suspect act, but let’s set that aside for the moment.

Thus, we see the spirit of the bill limited, in fact eviscerated, through the intervention of a powerful lobby of entrenched political freedom.  It is as if each dollar could be collated to a meter of concrete insulating this market from political intervention.  This brings me to the second fact to be discussed.

The desired effect of the bill was to remove many inefficient automobiles from the roads of the United States.  Any limitation on this effort thus comes about as a political effort.  While the bill in its origin was a political effort, each change it undergoes is the result of a particular effort by a particular party or parties.  And not political parties, per se; we’re beyond the specious line between Republicans and Democrats here.  We are in the vast and supple terrain of the "free market" and those who are more free than others.  The political "parties" are no longer fulfilling their designed purpose.  There is no mention in the Constitution of political parties.  The party was designed in an effort to collate similarly minded constituencies under the regime of a representative democracy.   In this sense, the party is epiphenomenal to the Constitution.  Once power shifted towards private corporations, the parties actually maintained their relevance only in terms of the contributions of those lobbyists. 

But all of this seems to be going a bit too far, no?  How can I claim that a single anecdotal bill can illustrate such deep and profound tensions within our ideology, within our way of life?  Let’s take this example a bit further.

Some people advocated giving a $5000 incentive to buy a new car, without any trade in.  These were the "keep the economy going through the mechanisms that haven’t worked so far" crowd.  That bill would have helped certain people (who were already looking to buy a car presumably) buy cars.  With debt.  Buying a car entails taking on debt, for most people.  And it amounts to handing the auto industry $5,000 for each car it sells.  And let’s not forget the debt contracts to the finance companies.  From out of taxpayer pockets, and into the coffers of a failing industry.  Planned obsolescence and a lack of emphasis on fuel efficiency have killed the auto industry.  Certain people made those decisions.  And they retired happy and well-fed.  There were voices of dissent, but they were ignored.  The encroachment of foreign auto firms into the US market continued unabated for 40 years.  The response of the US firms was to build bigger and bigger SUVs and fight government mandates about fuel efficiency.  They created and filled the "niche" of the SUV in the US market to keep their coffers stuffed. 

Auto executives drove the bus off the cliff.  It was their fault.  Those who bought these vehicles are also surely at fault, but let’s face it if there were no SUVs to buy, no inefficent clunkers filling dealership lots, then people could not have bought these cars.  Our veneration of the free market allows us to pretend that market circumstances, out of the control of those parties involved, somehow "corrected" for mistakes.  In this case, that scenario is also true.  It is just that the term "mistakes", most commonly used, also signals a sense of responsibility.  If the market is "free" and performing its duties in the spirit of justice, it will surely see to it that it signals to society what it this sense of justice revolves around.  Surely that is what economists are for, for predicting the laws of the market and giving an account of future expectations?

As you can see, this single bill raises issues that are embedded in the core of our society and its own self-conception.  We rail against socialism, yet in effect donating millions of dollars to failing industry is a very socialistic endeavor.  Only under socialism we would be bailing out necessary programs and functions, while reaping the benefits of those industries that self-sustain.  Or something like that.  There is an argument to be made that at this perilous juncture we are faced with the grim reality that the US auto firms are necessary to the US economy, and that they must be bailed out.  I believe that these notions are unimaginative at best and downright manipulative at worst.  Unfortunately, it is quite simply all that our politicians can think to do in this case.  Why?  Our free market ideology does not actually allow us to place blame on the shoulders of those who have made these decisions.  Surely, there must have been some market conditions out of the control of those parties who made these decisions, fought government intervention, and bankrupted an entire industry, if not a nation.  What we see here, though, is that there was a consistent effort by the government, through legislation, to "push" the industry toward adopting the fuel efficiency that was technologically possible.  The industry fought back, using the form of free speech conveyed by lobbyists, and here we are today.

I have a few more thoughts on the details of this bill, which should some weight to the claims that I have made above. What types of cars have been turned in under this legislation?  Well, since antique cars were de facto excluded from being turned in, we shouldn’t be surprised that they don’t turn up on the list of cars that have been turned in under this program.  But what kind of cars do show up on this list?

http://www.washingtonexaminer.com/opinion/blogs/beltway-confidential/Cash-4-Clunkers-Purging-Detroit-vehicles-from-Americas-roads-52583522.html
 
Remarkably, the ten most traded-in vehicles all american-made.  Five Ford products, two Chevys, two Jeeps, and a Dodge.  So, the automobiles that were planned to be scrapped are being scrapped.  And the cost of the scrapping is left to the government.  No one can trade in their 1990 Corolla, because it gets better than 18 mpg.  In fact it probably gets 30-40 mpg.  The cars that are being taken off the road are the cars that never should have been produced in the first place.  The passage of this legislation tells us this simple truth.  Our auto industry has proven that fact by virtue of the legislation that is referred to as "cash for clunkers".  The clunkers have actually always been clunkers. 

So what went wrong?  We might argue two lines.  Either while the decisions as to the way to go with auto manufacture were wrong, or the government’s actions right now are wrong.  It is possible that they could both be wrong, but our own ideology limits this as a mere abstraction.  The free market ideology limits our view.  You see, if the decision made by the auto industry was in fact "wrong" then the government should not intervene because the free market is just effecting its peculiar sense of justice.  So no matter how we answer the first query, we cannot have both actions be "wrong."  If the auto executives were "wrong" then the government could not act "wrongly."  It is right to bail out an industry upon which the market/nation depends when individuals in that firm behaved "wrongly."  So long as we embrace the free market, we are left with one of those hugs that just doesn’t seem to recognize that it’s over, one of those deep and very unsettling hugs from a stranger who seems just a bit too friendly.

Can the government be limited to only bailing out failing industries that are required for national existence?  When its legislation is dominated by industries, the answer is a resounding yes.  Legislation, as the primary function of government, once compromised, leaves any government enfeebled.  Since government created corporations, it was not created in order to facilitate them.  This fact in and of itself should give a moment’s pause to nearly any free market idealogue.  For the free market is not controlled by ideas, but by people.  Free people.
 

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