The media, in many news reports, has been heralding the government’s “Cash for Clunkers” program as a huge success. The program, which offers car-buyers a $3,500-4,500 rebate for their “clunker,” has already run out of money. This program that had one billion dollars allocated to it, which would be enough for around 250,000 vehicles, is broke in less than a week.

But many say this means it’s a great program. After all, this is good for the car dealers, manufacturers, consumers. Think of all the new cars that will be on the roads. Everybody wins, right? Wrong! Here are the reasons why “Cash for Clunkers” is a failure, particularly as we consider this country’s current economic crisis:

1. This has a negative impact on the people buying these new cars. You’re probably thinking, “How? They’re getting a new car.” Sure, they’re getting a new car. But what are they also getting with that? More debt. While there will undoubtedly be some who can use cash with the rebate to buy their new car in full, many will be borrowing money to buy their new car in spite of the rebate. In times of economic crisis, the best course of action is to pay off debt and save. But the government is encouraging people to go deeper into debt.
2. The car dealers are not getting paid. They’ve teamed up with the government to offer this program. And now the government, because it is the government, is slow to get them their money. Who knows if the money will ever come?
3. One of the “benefits” of this program was to get gas guzzlers off the road and replace them with more fuel efficient vehicles. But the environment is not being helped by this program. This is not a mass movement of Hummer owners trading them in for a new Prius. As long as your old vehicle gets slightly less miles per gallon than the new vehicle, you qualify for the rebate. Whatever benefit to the environment that there may have been is negated by the pollution added from producing a new vehicle that would not have otherwise been made and by destroying the old vehicle that otherwise would have continued to be used.
4. In most cases, the cars being traded in are not clunkers. They are functional and useful vehicles. What’s the problem when you destroy a perfectly good, yet old, vehicle like this?
5. When you destroy these old cars, as the program demands, they cannot be used for parts. There are people who make money from selling car parts like this. But now, in a recession no less, we’re going to take away this source of revenue from these people.
6. Also when these cars are destroyed, they cannot be donated to those in need. With this program, the government, for all the claims of wanting to help the poor, is actively discouraging charity.
7. These cars also cannot be sold to those looking for affordable transportation. There is still a market for these “clunkers.” Particularly in a time of recession, people are looking to save money. For many, this means that if they need to purchase a vehicle, they will look for a used car rather than a new one. But this program has already destroyed 250,000 vehicles that could have potentially been sold for a reasonable price to those who need a vehicle. Basic economics tells us that if there are less used cars, the price of the remaining used cars goes up.

The only winners in this are the government and the auto workers unions. The government reaps the benefits of the taxes collected on new car sales, as well as making people more dependent upon them. The unions have the benefit of job security/creation from the new cars being made. Everyone else loses.

Oh, and remember: the government that came up with this program that failed to address demand, lacked adequate funding, and hurts those most in need, is the same government that wants to take over health care. How is anyone buying into this?

Here is a clip from today’s Glenn Beck show on Fox News. He makes some of the same points I make above, but with more history. And he’s much more entertaining than I am.