The Law Of Unintended Consequences As It Applies To Buying A Car

Michael Barone has posted an article at Real Clear Politics today about the unintended consequences of the 'Cash for Clunkers' program.  The program was suspended Thursday night (while Congress tries to further fund it),  The House passed a bill to add another $2 billion to the program, but the Senate wants to make its voice heard.  According to The Hill yesterday,  Senators Dianne Feinstein (D-Calif.) and Susan Collins (R-Maine) released a statement that said the price of their support to extend it would be tougher mileage standards.

According to Michael Barone:

"Mind you, the government hasn't yet shelled out the $1 billion authorized for Cash for Clunkers. Dealers reduce the buyers' prices and have to apply to the National Highway Traffic Safety Administration for the rebates and NHTSA -- surprise, surprise -- has only managed to process 23,000 of an estimated 250,000 applications. The checks, we are told, will be in the mail. Oh, there's another problem: The dealers are required to destroy the clunkers, which will reduce the supply and increase the price of spare parts for those low-income folks who can't afford to trade their clunkers in even with a $4,500 subsidy. So much for helping the poor."

It was mentioned on one of the Sunday news shows that only the motor on the cars turned in has to be destroyed, but I suspect most dealers will find it easier to just destroy the entire car, setting up a spare parts problem in the future. 

What I was not aware of was that the program offered $3,500 or $4,500 rebates for trading in  old cars for new ones with slightly (four miles per gallon) better gas mileage.  The aspect of this program that bothers me is the bribery of the American people to buy smaller cars.  If you really wanted to stimulate car sales, why not give everyone a $ 4,500 rebate to buy any car they want?  On the other hand, how long will some of the car dealers wait for their rebates, and will those rebates ever arrive?  Will the financial incentives the car dealers have put out to spur car sales hurt them financially while they wait for the government to come through on its promises?  Will the government actually make good on its promises?