"Clunkers" Shows How The Entire Stimulus Package Goes Wrong

The “cash for clunkers” program was close to being a perfect part of the $787 billion stimulus package. It helped people who may not have been able to afford a car to get one. It should improve the energy efficiency of the average vehicle on the road.

The program is also helping the car companies, particularly GM and Chrysler, which have tens of billions of dollars of taxpayer money invested in them. The “clunkers” program should bolster the value of those investments.

The first problem the project had is that it caused resentment in other industries. Industries from airlines to housing wanted to know why the government would not set up similar programs to help them. The Administration’s answer  was that it did not have an answer. It probably figured out that spreading the same kind of programs across multiple sectors of the business community could eat up tens of billions of dollars from the stimulus budget, crippling projects that are already counting on funding.

The second problem is that the government could not get checks to dealers to cover the money that the businesses paid customers when they turned in old cars for new ones. Most dealers are too small to give money to dozens of people and then wait for weeks to be reimbursed.

The “clunkers” project says a great deal about what is likely to go wrong with most of the stimulus package. “Clunkers” was an ad hoc  project. It took the Administration’s eye away from the larger goal of restarting the economy. It also revealed the fact that the government has no effective infrastructure to move money from the Treasury into projects that are supposed to get funding. This may be a thorny issues as huge broadband and energy infrastructure building gets underway and schools are being build and rebuilt across the country.

The loudest criticism about the stimulus package, after the fact that it exists at all, is that it is slow to put money into the economy. With unemployment growing, the country needed the money in the spring. Then, it needed the money in the summer and now needs it in the fall. Most estimates are the the effects of the capital being invested will not be felt until 2010. The Administration faces the challenge that the huge warren of agencies and departments that is the US government is ill prepared to handle the scores of programs that make up the stimulus package.

The “clunkers” program is the tip of an iceberg. Dealerships can’t get their reimbursement checks, and that speaks volumes.

Douglas A. McIntyre