The Congressional Record is a unique source of public documentation. It started in 1873, documenting nearly all the major and minor policies being discussed and debated.
“CASH FOR CLUNKERS” mentioning the U.S. Dept. of Transportation was published in the Senate section on pages S9066-S9067 on Aug. 7, 2009.
The publication is reproduced in full below:
CASH FOR CLUNKERS
Mr. KYL. Mr. President, I am not sure I will need that much time, but there are four or five things I wanted to address this morning now that the Senate has completed its work through July and we will all be going home to visit with our constituents over the August recess.
What I did was I pulled together three or four topics I wished to address but, because of all the business we had this past week in dealing with the Sotomayor nomination and the cash for clunkers legislation, in particular, I had not yet had an opportunity to address them.
Let me start with the so-called cash for clunkers legislation which was adopted last night. This is legislation which I think was, as I said, a very well-intentioned concept in two respects: No. 1, to help auto dealers get off the mat--they had all been suffering from a lack of business--as well as to promote the idea of more fuel-efficient cars. But the well-intentioned plan ran into a lot of problems, and I think there were two reasons for that.
The first was the fact that it was rushed through. It was put on an emergency piece of legislation without hearings, without legislation having gone through the committee process, and, frankly, without anybody really thinking through how the program would be implemented. As a result, there were a lot of problems with it.
I got calls from car dealers. They had no idea whether they were going to be paid. The Department of Transportation had no idea whether it still had money left to pay the car dealers. As a matter of fact, one of them called me and said, as of Thursday a week ago, the Department had said they didn't need to kill the vehicles anymore that they had taken in on trade-in--that is to say do what they do to them so they can never operate again--because they weren't sure the money would be available to send to the dealer for the transaction. So the dealer may need to resell the car as a used car. The program, in other words, was very confusing and they got a lot of confusing signals out of the Department of Transportation.
That is why I offered an amendment yesterday that suggested we ought to call a timeout, a pause, to make sure all of the transactions that qualified could clear the process, the dealers could get paid, and we would know how much money we spent. Did we spend $1 billion? More than
$1 billion? My amendment would have said whatever it takes to pay for all of the deals that had been made as of today, but then establish some process whereby the sales could be tracked, so that each day, at least by the end of the day, we would know how many cars were sold and what the obligations of the government were to the dealers that had acquired those trade-in cars. That way, we would know when we got close to the additional money that had been allocated.
Well, my amendment didn't pass. As a result, it is quite likely we are going to continue to have problems with this program. So I hope the Department of Transportation can find a way on its own to do this without direction from Congress so we don't have the same kinds of problems we have had in the past.
But there is a more fundamental problem with the program, and that is that it subsidizes a specific segment of the economy, as several of my colleagues pointed out, for the most part to simply advance the sale of a car that would have occurred anyway. So at the end of the day, there was no new economic activity--simply the expensive replacement of a vehicle that might have been used as a secondhand vehicle for several more years but because of the requirements of the program is actually destroyed. So as a matter of fact, we actually took value out of our economy rather than putting it in, and at a great cost. It was estimated that it was about $20,000 per vehicle.
There was a great editorial--or column, I should say--in my hometown newspaper, the Arizona Republic, today by Bob Robb, who is one of the smartest people I know, especially when it comes to economic matters. The title of it is ``Cash for Clunkers a Lemon.'' In it, he points out what is wrong as a matter of economic policy with programs like this that subsidize a particular piece of economic activity but end up in effect simply costing the taxpayers of the country without advancing an economic cause.
I ask unanimous consent to have this very erudite column printed in the Record at this point.
There being no objection, the material was ordered to be printed in the Record, as follows:
Cash for Clunkers a Lemon
(By Bob Robb)
The cash for clunkers program is a perfect illustration of what's wrong with economic policy and thinking in this country.
The program is widely hailed as a successful economic stimulant. Congress is rushing to pour more money into it.
And it has been a success, if success is defined as selling more cars in the short-term.
Basically, the program offers owners of old cars a subsidy to buy a new one. If government subsidizes something, demand for that thing will increase--whether it is cars, or toasters or cosmetic surgery.
And if there is a quick expiration date on the subsidy, as is the case with cash for clunkers, demand will be artificially goosed even more.
This is obviously good news for car sellers and qualifying new car buyers. It may be good news for those in the car-making business, if production picks up to replace depleted inventories.
However, for the economy as a whole, the effect of cash for clunkers will be negligible, and slightly negative if anything.
In the first place, the federal government has no money. So, every dime of subsidy it is offering has to be borrowed. That puts a burden on future economic activity.
To the extent the subsidy induces people to make a car purchase they otherwise would not have made, the money so spent would have otherwise been spent on something else or saved. There is no clear evidence that the economy will be better off for the money to have been spent on a new car than the alternatives.
In political economy, it is virtually always better to look to the long-term than the short-term. Government has neither the wit nor the tools to manage short-term economic performance. Despite all the happy talk about shovel-ready projects, very little of the stimulus money has gotten out the door. The Fed has been flooding the economy with liquidity, but lending is still contracting.
Virtually everyone agrees that Americans need to spend less, borrow less and save more. President Obama has given speeches lecturing us about that.
Yet the federal government continues to offer massive inducements for consumption and borrowing.
The federal government will pay more for your old car than it is worth if you'll buy a new one.
The housing bubble was caused by an overinvestment in housing and lax lending standards. Yet the federal government is offering a sizable tax credit for the purchase of a new home and the Federal Housing Administration will guarantee mortgages with a down payment of as little as 3.5 percent of the purchase price.
Lax monetary policy is a subsidy for borrowing in general.
In other words, the message from the federal government is that Americans need to spend less, borrow less and save more. Just not now.
But it is during downturns that behaviors change. A respect for economic uncertainty is what causes people to live below their means and save for the future. When things are humming along, few see the need to change their behavior.
This isn't to say that government should remain idle during a downturn, particularly one as severe as this one. Government should be in the business of helping people cope, through such things as extended unemployment benefits and other income transfer programs.
Government shouldn't, however, be offering new inducements for consumption and borrowing. That's sacrificing the long-term for the short-term.
The reason policymakers do this is, in significant part, our fault. We hold federal elected officials, particularly the president, responsible for the short-term performance of the economy. If the economy is doing well at any given moment, we're likely to think the president is doing a good job. If not, we're looking to get rid of the bum.
Presidents do not an economy make. They can affect the long-term trajectory of the economy through wise or unsound long-term fiscal policies. But day-to-day, we're pretty much on our own.
Of course, any presidential candidate who actually said that would never get elected. And therein lies the heart of the problem.
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