Cash for Clunkers Program - Research Paper Example

 Cash for Clunkers Program Cash for clunkers program, implemented by President Obama, for assisting people for exchanging their old cars with environment friendly new cars, has raised many controversies in America. According to Wall Street Journal (August 23. 20090 “the $3 billion “Cash for Clunkers” plan is being hailed in Washington as a great success because so many Americans expected to get a $3,500 to $4,500 check financed by other taxpayers in return for trading in their old car” (The Wall Street Journal, 2009). At the same time, latest reports show that the much celebrated Cash for clunkers program is going to be dead; not because of less popularity, but because of the huge popularity and lack of funds. Automobile industry in America is a prominent employment sector for the people. Any problems occurred in the automobile industry may adversely affect the people who are working in this sector. The recent recession affected the automobile industry drastically and hence many Americans were on the verge of losing their jobs which forced Obama to come out with some kind of packages to stimulate the automobile industry. The announcement of President Obama to cut new vehicle carbon emissions and raise mileage by 30 percent, was an attractive one for the Americans not because of their commitments to the environment, but because of the cash incentives they are going to get from the government while exchanging their old cars with the new environment friendly cars. This paper analyses the reasons for the failures of the cash for clunkers program. Failure of cash for clunkers plan One among the so many reasons for the failure of the plan was the failure in forecasting the demands this program might create among the public. Stelzer (2009) has appointed out that the $1 billion of taxpayer money allotted for the first six months to cover rebates of $3,500-$4,500 on cars traded in for more fuel-efficient models was lasted only a week because of the enormous demand (Stelzer, 2009). The bureaucracy failed to estimate the demand and when more people approached them for money, they became clueless. Even rich people, who have already taken a decision to purchase a new car, approached the authorities for rebates. Even though the administration allotted further $ 2 billion for sustaining the cash for clunkers program, it was not sufficient enough even for a month. The administration was already handicapped by the economic crisis. The huge stimulus packages declared to revive the economy and the huge expenditure of the war on terror were more than enough for the administration to bear at the time of economic crisis. The cash for clunker program was a risk taken by the Obama administration. “Hundreds of auto dealers in the New York area have withdrawn from the government's Cash for Clunkers program, citing delays in getting reimbursed by the government” (STRUMPF, 2009). Another major reason for the failure was the delay in getting the cash rebates. The dealers forced to pay the rebates from their pockets and wait for the allotment of money from the authorities. But authorities delayed the payment citing unnecessary reasons like the lengthy paper works. The 135 pages of rules setting out what dealers had to do to recapture the refund money they laid out, were constantly changed, the web site they were to use to apply to get their money back frequently crashed, and some had to drop out of the program because they had plain and simple run out of cash (Stelzer, 2009). The third reason for the failure was the instability of the package. Bureaucracy changed the rules constantly for allotting the cash for clunker funds. The changing of rules has resulted in many people complaining about the discrimination. Those who applied for the fund earlier, got it with ease whereas the recent applicants struggled to get it due to changing rules. These changing of rules created doubts in the minds of the people about the sincerity of the administration in implementing this package. The plan started on July 1and since then it undergone many changes which resulted in people losing confidence in it. The fourth reason for the failure was the poor quality of the cars purchased. The so called fuel efficient cars were not efficient enough to give a considerable saving of oil. Moreover, the reduction of carbon dioxide or other toxic gases emission was not significant enough when we consider the huge cost for purchasing such high tech cars. The automotive sector is the largest employment providers in America and hence the employment in this sector should be protected which was the only motivation behind the declaration the program in a hurry. “In all probabilities, the buyers of the almost 700,000 cars, 41% may go for Japanese cars whereas only 39 percent will go for the once Big Three” (Stelzer, 2009). Cash for clunkers plan was actually intended to save General Motors and Chrysler or the members of the United Auto Workers. But the benefits were reached others as well. In fact many of the American people are interested in purchasing Japanese and German cars. In other words, the benefits of the cash for clunker program were enjoyed not only by the American car makers, but also by other car makers as well. Obama administration thought that a major share of the benefits of the program may reach the American companies; but in reality foreign companies reaped more profits out of this program which ultimately killed this program. Conclusions Cash for clunkers was a great program proposed and implemented by the Obama administration. But, the bureaucracy failed to implement it in a proper manner. The administration failed to forecast the demand properly which resulted in insufficient allotment of funds. It was difficult for the administration to spent such a huge amount at present because of the weaker American economy and the increased expenditure on other areas like war on terror, stimulus package etc. Even though the program was aimed to revive the American automotive sector only, many other foreign car makers also exploited it. References 1. Stelzer, I. M. (2009). Irwin Stelzer: Seven lessons of Cash-for-Clunkers' failure. Retrieved from http://www.washingtonexaminer.com/opinion/columns/IrwinStelzer/Seven-lessons-of-Cash-for-Clunkers_-failure-8162036.html 2. STRUMPF D. (2009). NY Dealers Pull Out of Clunkers Program. Retrieved from http://www.breitbart.com/article.php?id=D9A63RC81&show_article=1 3. The Wall Street Journal (August 23, 2009). All Clunkered Out The Dealers May, or May Not, Get Their Money. Retrieved from http://online.wsj.com/article/SB10001424052970204884404574366664026140786.html Read More