Critiquing “Cash for Clunkers”

WEST Hollywood, California – Nearly six months after President Obama and the Democratic Congress passed a near-billion dollar economic stimulus package, the American people finally saw results last week when the three-month “Cash for Clunkers” program exhausted all of its funding in just over three days, leading the Administration to seek more funding for the program from Congress.

Republicans, doing their best to hold on to the “Party of No” label they have been assigned are calling Cash for Clunkers a failure. But they’re using all the wrong reasons. Calling the program “Corporate welfare,” or “stupidity” neither adds to the national discussion or advances the public perception of Republicans. Instead, the GOP should be leveraging this lone success of the Obama Administration to ask key questions about his other programs and policies.

Cash for Clunkers did what billions of bailout dollars to Detroit could not. It got Americans to buy cars. Americans responded positively to the Cash for Clunkers program, and it boosted auto sales. That, my friends, is what I would call a success, even if it violates rational economic theory.

Just imagine the impact on General Motors and Chrysler had their tens of billions of bailout dollars gone to car-buyers and not to their shareholders. Each $4500 rebate would have been matched multi-fold by car-buyers. Inventory would be moving, plants would stay open, and sales tax dollars would plump up local governments, which would need less of a federal bailout to balance their budgets. Now that would have been a successful program that addressed several of the challenges facing the nation’s economy, from unemployment to local government finance.

Looking ahead, Republicans would be well-served to tone down their vocal opinions of Cash for Clunkers in light of the other major issue in Washington these days–healthcare–and hold it up as a model for fixing the nation’s healthcare system.

Believe it or not, there are similarities. Cash for Clunkers represents how government can leverage the free market to help individuals accomplish a public good.

The goal of healthcare reform and Cash for Clunkers are fundamentally the same. Both use government assistance to get people to do what they would not otherwise not do. In the case of Cash for Clunkers, it was to get people driving more fuel efficient cars. In the case of healthcare, it is to get people who won’t or cannot pay for healthcare insurance to get healthcare.

Yet the two solutions offered by the Obama Administration are drastically different. Cash for Cluckers, the successful effort, empowers people to make the best choices for what fits them. Its plans for healthcare reform create a “government option.” Unless you consider buying a GM car a “government option,” the Cash for Clunkers program was about empowerment and choice – the exact opposite of what is being considered for healthcare.
The “government option” for healthcare actually reduces choice. Those who have health insurance now and like their plans may be able to keep them. But want to change to something better or lose your plan for some reason and the “government option” becomes the only option.

Economic theory and basic common sense tell us that when something is free, people will use more of it. With our nation’s healthcare problems like addiction to prescription drugs, obesity and and aging populace, how many more doctor visits will people take if access to healthcare is free and easy? Can we even know and when would rationing begin, as it did with the Cash for Clunkers campaign?

Cash for clunkers program should also serve as a warning sign. While I hate to agree with Fox News Channel’s Steve Doocey, what will happen if the funding for healthcare runs out after a month or two or three? Will Congress have to authorize more funding and how will people get treatment while they wait for a cloture vote on the Senate floor?

Even my fellow Republicans should understand that a stopped clock is right twice a day, and that the Obama Administration should credit when their twelve hours come past. Using the successes – and shortcomings – of Cash for Clunkers as a model to critique other Obama administration would be more constructive, and politically rewarding, than simply saying, “no!”

Copyright (c) 2007, SteelWill, Inc. All Rights Reserved. Spot On is a trademark of SteelWill, Inc.


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