Cash for Nucor

Jesse Walker | August 5, 2009

"Reduce the supply of drivable used cars, and you drive up the price of all cars," Tim Carney writes in the Washington Examiner. By scrapping trade-ins, as well as by "boosting sales prices and lowering trade-in payments," Cash for Clunkers "taxes used-car buyers to subsidize new-car buyers."

With that in mind, Carney looks at who's been lobbying for and against the program. Not surprisingly, the automakers aren't the only enterprises with interests at stake:

One lobbyist for this bill was Nucor Steel. In Cayuga County, N.Y., Nucor turns scrap steel into sheet metal and other steel products. The clunkers are now becoming a subsidized feedstock for Nucor, which helps explain why Sen. Chuck Schumer, D-N.Y., has led the push for $2 billion extra in clunker cash.

Then there's Enterprise Rent-a-Car also backing the bill, supposedly out of solidarity with automakers. But Enterprise sells its rental cars after a few years. As a rental firm that buys its cars new, Enterprise benefits every time someone else scraps a used car.

On the other side of the lobbying debate were non-dealer auto-repair shops, whose businesses depend on used or older cars, which the owners don't take to the dealer for repair. Also, the Automotive Aftermarket Industry Association opposed the bill.

These are the guys who can sell you the headlight for your 1998 Ford Taurus, or who rebuild an engine out of a junked car.

Shredding old cars saps both their clientele and their supply of old transmissions to rebuild.

Comments

squarooticus|8.5.09 @ 10:37AM|#

As a rental firm that buys its cars new, Enterprise benefits every time someone else scraps a used car.

I fear I must be getting dumber by the minute, because I do not see the logic chain here. Someone who gets it, please explain it to me slowly.

Jesse Walker|8.5.09 @ 10:47AM|#

That's my fault for leaving out some text I had meant to quote with the rest. I've added it; hopefully his argument is clearer now.

Tomcat1066|8.5.09 @ 10:55AM|#

squarooticus: Cash for clunkers is getting rid of used cars that would compete with Enterprise's used cars, thereby driving up the prices or, at the very least, redirect purchasing dollars towards Enterprise.

creech|8.5.09 @ 10:58AM|#

Is this program actually resulting in new sales or just having taxpayers subsidize the normal rate of clunkers being traded in?
If the US car market is now down to 8 million units/year and the average car is over 9 years old, then isn't a substantial portion of monthly sales already "clunkers?" Is the upsurge merely due to those who would have bought anyway in the last few months waiting for their handouts, and those who would buy in the next few months anyway stepping up their buy before the government cash runs out?
Are the auto companies going to see a big drop off come the fall due to normal demand already being satisfied?

|8.5.09 @ 11:03AM|#

Is this program actually resulting in new sales or just having taxpayers subsidize the normal rate of clunkers being traded in?

I think it depends on your time frame. Over the very short term, I think it drives up new car sales. Over a longer time frame, it probably just "relocates" sales that would have occurred anyway into the window when you can get Free Money.

Are the auto companies going to see a big drop off come the fall due to normal demand already being satisfied?

I think they will, yes.

Brian Combs|8.5.09 @ 11:12AM|#

It makes me wish I hadn't bought a new car six months ago when the economy really needed it. :-(

|8.5.09 @ 11:14AM|#

Another "benefit" of this boondoggle (if you happen to belong to the UAW) is that it is soaking up the huge inventory backlog of the domestic carmakers; soon they will be ramping up production to meet (likely nonexistent) demand.

It just gets better and better.

|8.5.09 @ 11:14AM|#

What about the folk on our southern border? Haven't you seen the convoys of used vehicles heading south? They depend on used cars in Mexico. Will Cash-for-clunkers cause an uptick in stolen cars?

|8.5.09 @ 11:19AM|#

Yes, gonetowork. If there are 200,000-600,000 less used cars in America the Mexicans will have no choice but to steal your car. On their backs, no less!

Kevin|8.5.09 @ 11:25AM|#

I'm not sure how to do this myself, but I'd like to see someone compute the actual "cost" of this $4500 rebate. Presuming this was paid for by borrowing money in the form of bonds, and using the percentage rate and term of bonds issued today, what is the interest on that $4500 when the bonds mature? Any takers?

|8.5.09 @ 11:26AM|#

http://opiniojuris.org/2009/08/04/the-wto-subsidies-rules-and-cash-for-clunkers/

... According to press reports, more than 70% of the clunkers that were traded-in were domestic. Moreover, as reported here, consumers are showing a preference for imported cars when they purchase under the program, with Toyota (17%) and Honda (14%) leading the way. The top ten sellers under the program are Ford Focus, Honda Civic, Toyota Corolla, Toyota Prius, Ford Escape, Toyota Camry, Dodge Caliber, Hyundai Elantra, Honda Fit, and Chevy Cobalt. In other words, six of the top ten sellers are foreign cars (although the Camry is built at home and abroad).

Cash for Clunkers is one of the few government subsidy programs that I am aware of that clearly has the de facto effect of promoting imported over domestic goods...

Hobo Chang Ba|8.5.09 @ 11:29AM|#

Obama has been one of the most regressive presidents in recent memory. Oh, it looks like he's being "progressive" by taxing millionaires; yet by artificially decreasing the supply of used cars, he will be forcing poor people to either give up their cars when they can't be repaired or replaced - or go deep into debt to purchase a new one. Why do the poor have to ride the bus while the rich elite who made cars artificially unaffordable in the name of environmentalism don't?

Also:
- The poor will disproportionately pay the burden of the coming price inflation as the government prints more money and devalues the dollar. Causing price inflation artificially via printing money is the same as a hidden sales tax, and everyone knows sales taxes are regressive. The more goods cost, the more nondiscretionary income is used up, until any discretionary income is gone and they can no longer afford even the most basic things they need. Increasing gas taxes and fuel standards will target these people as well. Raising taxes on cigarettes disproportionately hits the poor.

- Does anyone NOT believe the minimum wage increase has exacerbated job losses at the bottom, as labor costs increase in a shrinking market?

- Forcing poor people to buy low-cost public insurance by law is worse than now where they can get treated for free at hospitals with no insurance.

- The industry bailouts take the money of all taxpayers and give it to the wealthiest members of society who have run their businesses the worst.

I'm just incredibly confused about how Obama says he's protecting the working and middle classes while everything he does is a form of invisible taxation that disproportionately hits these groups...

Hobo Chang Ba|8.5.09 @ 11:32AM|#

Almost forgot: renters, who tend to be lower or middle class, paying for the mortgages of those who had enough money to be able to buy houses, who tend to be upper-middle to upper classes (or conversely, to encourage the lower or middle classes to buy houses and go deep into debt).

|8.5.09 @ 11:33AM|#

http://wheels.blogs.nytimes.com/2009/08/04/cash-for-clunkers-by-the-numbers/

...He added that the average annual income of those who bought cars with their rebates was $57,700, just under the $61,000 for all new car buyers these days. That suggests that consumers with the lowest incomes who, in theory, need the rebates most, are not benefiting from the program.

|8.5.09 @ 11:33AM|#

I'm not sure how to do this myself, but I'd like to see someone compute the actual "cost" of this $4500 rebate. Presuming this was paid for by borrowing money in the form of bonds, and using the percentage rate and term of bonds issued today, what is the interest on that $4500 when the bonds mature? Any takers?

Do you want the cost of an individual $4500, or the cost of increasing new car sales by one? The latter requires figuring out how many of these vouchers went to people who would have bought a car anyway now (or who waited a few months once the program was proposed, or who sped up purchases by a short length of time) and is trickier. However, the latter is also a better measure of the true cost of the program per stimulus.

Rich|8.5.09 @ 11:36AM|#

I'm just incredibly confused about how Obama says he's protecting the working and middle classes while everything he does is a form of invisible taxation that disproportionately hits these groups...

You yourself more-or-less said it: He's protecting them being taxed as millionaires.

The Angry Optimist|8.5.09 @ 11:38AM|#

Johnny Longstoro -

How many on those list are manufactured here? I know that the Camry is made in Kentucky.

|8.5.09 @ 11:46AM|#

The Camry is the only one listed as being made in the US. I don't know where the rest are made.

|8.5.09 @ 11:53AM|#

But its "wildly popular". The shere economic ignorance of this program has been pointed out numerous times by both Reason and its posters and various other places on the web.

I don't think the Dems and their media allies are malicious in that they really intend to rob poor people and give it to the upper middle class. I think they are just that ignorant. They really don't understand the second order effects of their actions. Worse still, they are so pig headed they refuse to learn, which is just as bad as being malicious.

|8.5.09 @ 11:57AM|#

I don't think the Dems and their media allies are malicious in that they really intend to rob poor people and give it to the upper middle class.

The poor are propaganda'ed into voting Dem; the middle class needs bribes.

Kevin|8.5.09 @ 11:58AM|#

Do you want the cost of an individual $4500, or the cost of increasing new car sales by one?

The first one. I was reminded of a story in which a stimulus program spent $8000 to weatherize old houses, so that the owner would save $450 per year in energy costs. I know there are supposedly "other benefits" to cash for clunkers, but I'm wondering how much we are charging ourselves in the future for our car rebate today.

hmm|8.5.09 @ 11:59AM|#

scrap is still metal prices have climbed, but they are still in pretty low. If this does flood scrap it will lower the price again if no one is buying it.

hmm|8.5.09 @ 11:59AM|#

wow, backwards talk I did.

|8.5.09 @ 12:05PM|#

"I was reminded of a story in which a stimulus program spent $8000 to weatherize old houses,"

Take a perfectly functioning window and replace it with a window that won't pay for itself before the house is torn down. That really is the broken window fallacy in action. Progressives, liberals, whatever you want to call them are ignorant. They never took economics. They know little about history beyond a few PC cartoons they learned in school. They live in an echo chamber filled with meaningless do gooder clichés and thought that hasn't advanced beyond that of a 14 year old complaining about his parents not letting him use the credit card. They truly don't understand that this shit doesn't work. And they are not going to anytime soon. The more this stuff fails, the more they will blame it on everything but their childish ideas and understanding of the world.

JB|8.5.09 @ 12:20PM|#

As someone without a car it's nice to know I'm subsidizing rich people buying new cars.

Between this and the bailouts of rich fuckers at Goldman Sachs, I'm starting to think it's time to call for eating the rich. At least those that get down and suck government cock.

You get in bed with the government you deserve your cock falling off...or getting chopped off.

hmm|8.5.09 @ 12:32PM|#

I'm thinking of trading in my truck and stripping it before I take it. Have a redneck friend that did this with an older truck, I'm trying to figure out what I can scrap the parts for before I do it, I also wonder if they have to run.

hmm|8.5.09 @ 12:33PM|#

Crap if I do this is JB going to cut off my cock!

Space Fiend|8.5.09 @ 12:42PM|#

hmm: it has to run, and it has to be built after some arbitrary year (possibly 1985?)

¢|8.5.09 @ 12:44PM|#

I don't think the Dems and their media allies are malicious in that they really intend to rob poor people and give it to the upper middle class.

Start thinking it. If they acted out of ignorance, the "rob poor people and give it to the upper middle class" pattern of "unintended" consequences would have to break occasionally, just by accident. It doesn't.

Sean W. Malone|8.5.09 @ 1:05PM|#

"Start thinking it. If they acted out of ignorance, the "rob poor people and give it to the upper middle class" pattern of "unintended" consequences would have to break occasionally, just by accident. It doesn't."

I know! It's something I've kept at bay for a long time, but I'm starting to realize that there's no other decent conclusion here. I tend to think Occams Razor suggests that stupidity is more likely than malice, and that's true in general - but the pattern just doesn't break at all. Every time some government asshat opens his mouth, poor people get fucked over in favor of some richer people. Every... Time...

What other conclusion can you draw than that it's intentional?

|8.5.09 @ 1:15PM|#

hmm,

He seems fixated on them, I'm sure once he gets a hold of it he'll just want to study it.

|8.5.09 @ 1:16PM|#

Didn't mean to spoof you there, hmm. Typed my salutation in the Name field. Hard to type with one hand defending from genital mutilators.

-mantooth

|8.5.09 @ 1:18PM|#

The Camry is the only one listed as being made in the US. I don't know where the rest are made.

The Corolla is made in Fremont, California and the Civic in Greensburg,Indiana.

JB|8.5.09 @ 1:42PM|#

He seems fixated on them, I'm sure once he gets a hold of it he'll just want to study it.

I have my own and as a healthy hetero male it does often get too much attention.

As for hmm, you are safe from me, but that doesn't mean I don't think someone else should do it.

I really question the point of working these days. Why should I go to work to give a huge chunk of my money to bail out AIG (which is mostly a bailout of Goldman Sachs) and help rich people buy new cars? Fuck that.

hmm|8.5.09 @ 1:53PM|#

hmm: it has to run, and it has to be built after some arbitrary year (possibly 1985?)

I knew 1985. I wasn't sure on the running. I do know you can strip the car. At least one dealer will take a stripped truck, or did.

Didn't mean to spoof you there, hmm. Typed my salutation in the Name field. Hard to type with one hand defending from genital mutilators.

No worries. I need all the help I can get sounding smarter than I am or not sounding like a retard.

As for hmm, you are safe from me, but that doesn't mean I don't think someone else should do it.

I can't really deny someone wanting to act in their self interest when the funding for that interest is coerced from that person to begin with. Might as well get my tax money back if I can.

hmm|8.5.09 @ 1:57PM|#

For the record I'm so far from rich it isn't even funny. I just happen to won a truck and while not initially in the market for a car, I find it hard to pass up an opportunity to get more for it than it's worth.

I'm honestly considering a mini documentary of it. The truck is a 97 F150 4X4 w/ less than 150K on it and in decent or good shape. Front bumper has an aerodynamic bump on it from an argument with a bush. I can probably sell it for right at the 4500 mark if I wait or work at it, but I'm thinking I can strip it, part it and still get $4500 for it plus the sale on parts. Would make an interesting little short about how retarded the system is.

Sean W. Malone|8.5.09 @ 2:43PM|#

Hmm... PLEASE do that documentary - I will do all your audio work & music for free if you do. Promise.

JB|8.5.09 @ 2:54PM|#

hmm, I won't judge you if you participate. The whole system is so fucked it doesn't matter anyways. If you participating makes it crumble just that much faster, then good.

I'm reconciling myself to all the fun that will be had when it comes crashing down. All sorts of democrat fetuses and Obama zombies to be aborted.

hmm|8.5.09 @ 2:56PM|#

Hmm... PLEASE do that documentary - I will do all your audio work & music for free if you do. Promise.

wife is in TV. Which is one of the reasons I was considering it. She has a ton of friends who shoot video for commercials to things like History Channel documentaries.

Shawn|8.5.09 @ 3:36PM|#

I believe the headline should read:

"CfC Program Has That Nucor Smell"

Thank you, thank you...

hmm|8.5.09 @ 4:00PM|#

Nucor needs to fail anyway. Antiquate model and poorly run company in an ever increasingly competitive market.

jhenry|8.17.09 @ 1:20AM|#

Generally, trade-in vehicles must get 18 or less MPG (some very large pick-up trucks and cargo vans have different requirements)


Jhenry
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