Sunday, August 2, 2009

All Clunkers Are Not Created Equally

Apparently unlike most Americans, I am usually uncomfortable taking supposedly "free money" from the government. However, as the owner of an eleven-year old minivan and a fourteen-year old four-door sedan, I put aside my prohibitions in favor of the "free" $4,500. After all, I and my children will be paying for it anyway via taxes plus interest on all that debt.

But image my surprise that my "clunkers" are not gas-guzzly enough to qualify (wow, Congress actually put a limitation on a government give-away program?). Unfortunately for me, I stupidly made prudent, common-sense choices in automobiles and was concerned about good gas mileage even back at $1.40 a gallon. Back then, I had the money to purchase something much grander but stupidly chose not to and instead save the money. Many of my smarter friends had it right, though. They purchased massive, luxurious, heavy, gas-guzzling SUV land-yachts and took full advantage of the IRS tax incentives encouraging larger vehicles. They’re written off many thousands of dollars since then and will now likely receive another $4,500 toward the purchase of a new car courtesy of the federal government. Huh? Congress first incentivizes bad behavior and then later rewards such behavior. And people wonder why I worry when Congress attempts to influence markets.

Fortunately, a few brave souls in Congress attempted to close the ridiculous SUV tax loophole with HR 5579 back in 2006, which died in committee of course. Good luck now that the government owns G.M. SUVs are a highly-profitable segment of the market and the auto union, owners of many in Congress, is a major shareholder.

United Auto Workers (UAW)#16 on the All-Time Top Political Donors to Congress

Top Recipients of UAW Donations
(Image that! The top recipient also helped the UAW negotiate a better position ahead of other creditors during the government purchase of G.M.)

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