Well, true, this would hardly be the first government subsidy or bailout, or the last, but the discussion here is about whether the cash-for-clunkers plan is good. Justifying one bad plan on the basis that there are others in existence, with admittedly bigger consequences, isn't too persuasive, in my opinion. I'll concede, however, that I'm too passionate about this issue, and I should lighten up on it.
I'm not sure, but I think the plan only permits the owner of of the trade-in to register the new vehicle in his name, and not someone else's name. Can someone verify whether this is true?
I think you're right, but I haven't seen anything that prohibits you from turning around and reselling your new car. But I haven't tried to read the bills either.
The buyer will have to pay taxes again, unless they are a family member, and the lemon law usually only protects the original purchaser.
Good point about the lemon law. Wouldn't have thought of that, but that's a small risk. What constitutes family for this plan? I presume a spouse, parents and children would be included, but what about siblings?
The purpose of this program is to give the vehicle makers a boost during this bad year. It's part of the stimulus package and the vehicle makers wrote the law. It's a $4 Billion gift to them. Any other features are tangential and simply additional benefits. Don't read more into it than is there. Read it for what it really is. This legislation is a gift to the vehicle makers and it gets 1 million guzzlers off the roads forever.
Consider the multiplying effects of getting these guzzlers off the roads for 4 yrs let's say.
If at the minimum every one of the traders gave up a 15 mpg ( real world ) guzzler for a 22 mpg vehicle then if on average each driver had been driving 15000 mi/yr the savings each year would be... 1000 gal x 1 million drivers in 2009 682 gal x 1 million drivers in 2010 320 million gallons saved each year in 2010, 11, 12 and 13
That's over 1 Billion gallons of fuel not used by these drivers which can be used by other drivers or which we as a nation simply don't use and thus keep the money at home instead of giving it to Big Oil and propping up the sales of our oil-producing enemies.
The money is already designated to go to the vehicle makers as part of the stimulus package. It's been agreed by the majority of the population ( via our representatives ) that this is a good idea, borrowing from our future earnings this year, using the leverage of future interest payments to try to help us get out of this horrific mess.
That part is finished already. It's been decided.
Now it's only about who gets what and how can this stimulus be best used to generate as much business as possible. The poster to whom you replied is one of the direct beneficiaries but we all benefit as a whole nation this year and into the future.
So the choice is doing nothing? It's been decided already that sitting around waiting for nothing to happen won't work.
Actually if the future generations are smart they will do the same thing that's been done since the national debt first occurred. Ignore it.
The national debt is a boogeyman under the bed. It's not there. What is there is the interest on the national debt. The national debt will never be repaid - ever. It's not intended ever to be repaid. This is called leverage in business. When the notes come due in year 2xxx the principal will be pushed out another 10 or 20 or 30 yrs again. We will have to pay the interest on it but as long as the economy grows and we can cover the interest expense then we're doing fine.
It requires growth in the economy and an increasing revenue stream from a broadening economy with more and more people contributing to it.
What constitutes family for this plan? I presume a spouse, parents and children would be included, but what about siblings?
The sales or use taxes are a state by state issue. Some states charge tax for gifts between siblings but I think most don't care. Some states only left gifts to relatives transfer tax free, others (like California) will let a sale be tax free. Everyone will just have to check with their local DMV to be sure I think.
Dodgeman07, the clunker law so far requires you to have owned (and insured?) the clunker for one year in order to get a voucher.
"If at the minimum every one of the traders gave up a 15 mpg ( real world ) guzzler for a 22 mpg vehicle then if on average each driver had been driving 15000 mi/yr the savings each year would be..."
I think your 15/22 mpg numbers are way too optimistic. Also, if fuel economy continues to improve, those that would normally wait two or three (or whatever) years to trade their vehicles would buy more fuel efficient cars than those who buy '09 and '10 models due to the incentive. Therefore, over the long term I don't buy the simplistic argument that your numbers suggest.
So the choice is doing nothing? It's been decided already that sitting around waiting for nothing to happen won't work.
Artificial stimulation can be much worse. the reason we are in a recession is because we burst a bubble that was built on artificial stimulus.
Actually if the future generations are smart they will do the same thing that's been done since the national debt first occurred. Ignore it.
Can't ignore it forever. One, the debt isn't a fixed number, it keeps growing. Two, the payments on the debt take up more of the budget all the time. Three, there is only so much money to loan. Loan it to the gov't and there is less capital for the rest of us, not to mention potentially higher interest rates.
It requires growth in the economy and an increasing revenue stream from a broadening economy with more and more people contributing to it.
That is a lot easier said than done. We are actually losing the most productive of our workers, the baby boomers now. The percentage of retirees will continue to grow for years to come.
"We will have to pay the interest on it but as long as the economy grows and we can cover the interest expense then we're doing fine."
I hope you're right, for our sake, and that of our children and future generations. However, many people are really concerned about the possibility that the interest on the debt will become too large a percentage of GDP. That will tend to slow the growth you're counting it, won't it? And, if the percentage of interest relative to GDP gets too high, paying that interest would likely become a real burden. Hopefully, we won't go from the high tech bubble, to the housing and derivative products bubble, to the interest on the debt bubble. I have no doubt that Summers, Geithner and Bernanke are very aware of this danger, but the jury's out on whether it'll be politically possible for them to reign in the stimulus when the economy recovers. The risk is that fiscal and monetary restraints could derail the recovery.
I understand that President Obama inherited a really difficult economic situation, so I go along with parts of the stimulus package, in particular the effort to save our financial institutions from a melt-down. So, doing nothing would not have been a good option, in my opinion. Choosing which manufacturing industries to pour money into is a different matter, however, because in the end most of the jobs will be lost anyway. Some of this stimulus money will remain in the U.S., but much of it will end up offshore.
One thing is certain, and that is that we live in interesting times. There are no easy answers.
We are actually losing the most productive of our workers, the baby boomers now.
Not true. Younger Americans are working more hours than ever before, and GDP has grown faster than population. More people under 40 are working two or three jobs than at any point in the last 50 years, and more of us are doing it without the pension plans or health insurance that employers used to provide back in our parents' day. The boomers weren't "the most productive of our workers"--they were the generation that grew up with two strong legs under them: the comfort of post-WW2 corporate security and the backup of a government-provided, taxpayer-funded safety net. Fueled by demand created by the rise of US-based global corporations, many of them earned middle-class wages for essentially unskilled labor--UAW workers, for example. Now, the corporate juggernaut that made such a lifestyle possible is falling apart, and the financial crisis also threatens the government "leg."
The jobs they enjoyed simply don't exist in the US for the post-boomer generation. The retirement of the baby boomers will create a burden for these younger workers like me, but it's not because they're more productive than we are--it's because there are so dang many of them, and because Congress refuses to do anything to reform Social Security.
Thanks for the side trip. We now return to our regularly scheduled rant.
I think your response pretty well covers the issue of needless spending to try and stimulate an economy by going deeper in debt. The real issue is interest. If the Chinese quit buying our worthless debt it WILL raise interest rates. Then that wasteful spending becomes an even bigger issue.
Many of the vehicles purchased over the last several years were bought with bogus equity from homes that were not worth what was loaned. We are awash in vehicles right now. I don't think we need to try and get more people into debt with gimmicks like this joke of a Clunker Bill.
The jobs they enjoyed simply don't exist in the US for the post-boomer generation.
I will agree with you. My son is working as a carpenter in Alaska. He is making less than I did 30 years ago as a Carpenter. I did a short stint in the Carpenter's Union. It is a sad state of affairs.
I know he could not afford to trade in his 15 year old 4Runner and take on any more payments. Paying for his home and food is more than he makes right now. I understand the frustration the under 40 crowd must have had last election. Don't expect any miracle cure or change. It will get worse before it gets better. The economy is not going to grow, only the government is growing as the economy is shrinking.
I dunno - people are saying swine flew all around here.
I just learned that "CFC" had too many weird connotations (smog and fried chicken) so the House is calling the clunker bill the Consumer Assistance to Recycle and Save act.
I understand the frustration the under 40 crowd must have had last election. Don't expect any miracle cure or change. It will get worse before it gets better. The economy is not going to grow, only the government is growing as the economy is shrinking.
I look at it a bit differently. In times when industry cannot do as much, people will expect government to pick up the difference. Is that a reasonable expectation? Politically, yes. Economically, maybe. One thing is for sure: Americans will have different expectations for careers, standard of living, etc. 20 years from now than they do today.
One other tidbit: in the 1960s and 1970s, when the boomers were getting started on their allegedly "most productive" careers, income taxes on the wealthiest Americans were far higher than they are now--the top marginal rate was 90% (today it is 39.6%). So don't claim that the problem is that we are overtaxed today.
That's my point. My hypothetical suggests that with my neighbor right there at my side during the whole transaction (she gets a test drive at the dealership, figures out what model/options she wants, pricing is EXACTLY where it needs to be etc. etc.), I sign all the necessary paperwork at the dealership. Then she and I head over to Motor Vehicles and conduct the next transaction within the hour. She gets a new car a very nice price and I get spending money that would faaaaarrrr exceed the $50 the junkyard man would give me on a donation to the Purple Heart.
Profit margin for the sale will be lower than I had originally planned as you make a very good point about the double taxation. Lemon law and warranty to original owner might effect deal as well. All told, it still could happen...nationwide!!!
Long story short, I've owned, registered and insured the "clunker" for 22 years. I qualify. She doesn't. But the $4500 is sitting there on the table for whomever decides to take it. Now in the hypothetical, I'm not real interested in a new automobile so she takes it and I bank the hour or so of my labor. In reality, it's much different. I'm keepin' the Uncle Sam gift.
The retirement of the baby boomers will create a burden for these younger workers like me, but it's not because they're more productive than we are--it's because there are so dang many of them, and because Congress refuses to do anything to reform Social Security.
Are the baby boomers really going out in droves, though? I haven't seen any official numbers to back this up, but from what little personal experience I've seen, the boomers are staying in the workforce longer than their parents. On my Dad's side, both grandparents retired when they turned 60. On my Mom's side, Granddad retired at 55 (in 1971) and Grandmom at 56 (in 1980). Grandmom did go back to work...not so much for the money but just because it was in her blood I guess. She worked part time with flexible hours so that she could take off on a vacation at a whim if she wanted to. She finally quit completely when she turned 70. My grandmother's cousin also retired in 1980, at 55.
As for my parents and their siblings? Well my Dad just retired last fall, at the age of 62. Both of my uncles on that side, who are older than him and technically not boomers, retired around the age of 62, but both ended up taking on part time jobs for more income. My Mom was going to retire at the end of 2008, just before her 60th birthday, but decided to put it off another year, possibly longer depending on the economy. And she says that once she retires, she'll go back to work. My stepdad is 56, and has no aspirations to retire anytime soon. My uncle, Mom's brother, is also 56, and will probably work until he either dies, his health deteriorates too badly, or he nails it in the lottery.
I remember hearing a lot of hoopla a few years back when the first boomers were about to turn 60, and the landscape was going to change. Of course, that was also 2006 when the economy seemed a lot healthier. I have a feeling though, that they didn't retire in droves as predicted. And many of those who did, have picked up jobs in retirement, so they're not completely out of the work force.
Actually, that brings up a question from me. Once you get old enough to start collecting social security, I know that if you go back to work, once you make too much money, you start losing out on SS. However, are you still paying into social security, if you're working at that age?
One other tidbit: in the 1960s and 1970s, when the boomers were getting started on their allegedly "most productive" careers, income taxes on the wealthiest Americans were far higher than they are now--the top marginal rate was 90% (today it is 39.6%). So don't claim that the problem is that we are overtaxed today.
Very few people were in that 90% tax bracket. Where they have raised taxes is in a lower range of the middle class. Plus SS and Medicare tax at 7%+ right off the top. Those making under $100k are hit pretty hard by taxes when you look at State, Federal and SS. Add to that nearly 10% sales tax in states like CA, and yes tax is a bigger issue now for the baby boomers than it was in the 1960s. In 1965 my total years tax on $5200 income was $624. I was considered middle class. Of course I did not make what an auto worker in the UAW made. I was a lowly telephone man.
Also, in 1965 you could buy a new car for under $2000. I bought a brand new Toyota Land Cruiser for $2400.
So who will pay the tax bill, if not you and those younger than you? More government will mean more taxes needed and less people paying taxes. Civil servants paying income tax is not a net gain in tax revenue. Look for the same stagflation that hit us in the late 1970s. We are still in better shape than those years. At least for now.
Actually, that brings up a question from me. Once you get old enough to start collecting social security, I know that if you go back to work, once you make too much money, you start losing out on SS. However, are you still paying into social security, if you're working at that age?
The answer to both questions is yes. If you make over $12k in a year you lose some of your SS benefit. What I am seeing are more retired people volunteering. One hospital here has 875 volunteers. We have a close friend that is 83 and she volunteers at a hospice and the community center. She drives 30 miles to the hospice every Friday. There are baby boomers volunteering in so many areas it is hard to keep track.
Another 70 year old friend does school maintenance on the 3 local schools here in Alpine. They laid off some of the maintenance people due to budget cuts. Yet the maintenance did not go away. He is active in Kiwanis and the school district asked for help with painting, plumbing and general repair. And the Kiwanis are keeping the schools maintained on a voluntary basis. People can have ill feelings about the baby boomers. A big percentage are still carrying a load for free.
I have yet to read the full program, but would it be possible to manipulate it. For example, say I am in the market for a new car and either have no car to trade in, or the car I have does not qualify. Could I go out an buy some $200 '87 Caprice, and turn around and trade that in for the $4500 voucher? And if that is the case, it would seem there would be a lucrative business opportunity for independent dealers to sell cheap inefficient cars just for this purpose.
If this loophole exists, it could be bad news for the program
Well, one of the stipulations is that the clunker you're turning is has to have been owned by you for at least one year, plus had insurance and registration.
If I wanted to pull this stunt where I live, in Maryland, that $200 Caprice would probably cost another $150-200 by the time I was done getting the title and tags for it. An '87 Caprice is old enough to qualify for historic tags in Maryland, which are cheaper than regular, plus exempt it from needing an inspection or emissions testing. If it was new enough to not qualify for those tags, you'd be looking at around $190 for tags, versus $51. And to get a $200 clunker to pass inspection, well you might get lucky and only have to sink a few hundred $ into it. Or you could blow $1000 or more, depending on how much of a piece the car is.
Then you have to insure it for a year. In my case, that car would run around $300, to add it to my policy. Also, the car has to be running when you trade it in. I guess if you can just limp it to the lot and it dies there, they might make an exception.
So basically, for me to pull a stunt like this, it would cost $650-700 minimum, plus a few hours of time at the DMV. Plus having to hold onto the car for a year, and hoping that it doesn't have some catastrophic breakdown in that year that disables it so it can't be driven to the dealer. For instance, if the engine or tranny on that car dies, you could be looking at several thousand $ to repair it, unless your handy enough to get used tranny or engine and do the work yourself. Then you have to factor in all the time you spent doing that.
Is all that worth it for $4500? For some, it might be. But I wouldn't want to deal with that hassle.
Now for the person who already owns that '87 Caprice, provided it still runs and they've had it for at least a year, they can just take it to the dealer, trade it, and be done with it without any fuss. And that's how the bill is intended to work.
So while this cash for clunkers thing can be abused, I don't think it really lends itself THAT easily to it.
What I have read the plan will only last a year or 1 million vehicles. You may buy the clunker go through all the hoops and when the year is up all the stimuli would be gone. Then you are stuck with a POS clunker. I cannot see any good loophole there. If you live in one of the burbs in So CA that have tight restrictions you cannot leave a vehicle parked in your driveway for any length of time. You will need a garage for this POC you are now into for more than it is worth.
Will the program be abused? Of course that is how Congress writes all legislation.
Yeah, I was thinking of the timeline aspect, too. Wait too long to buy that '87 Caprice, and the program might be over before you've had the car for a year. And then you're left stuck with a car that probably only Lemko and I would even appreciate, and, well, that's not a very big target audience to try re-selling a car to!
And your point about parking restrictions is a good one. Personally, I could probably get away with letting something like that sit indefinitely, as long as it either has tags on it, or is hidden away well enough. But, not everybody has that option!
For me, cash-for-clunkers would be awesome. I've got a clunker and would love to trash it (for $4500) and also sell an F-150 (it's not a clunker, it's nice but excessive). Then, getting rid of those two vehicles would allow me to buy a new vehicle. And I do want something fuel-efficient -- a Ford Escape is top of the list.
The only way I can afford to buy new would be if the cash-for-clunkers bill goes thru. It seems they're making this bill just for me. I hope it passes soon. And if it does pass, a big thank you to tax payers!
" in the 1960s and 1970s, when the boomers were getting started on their allegedly "most productive" careers, income taxes on the wealthiest Americans were far higher than they are now--the top marginal rate was 90% (today it is 39.6%). So don't claim that the problem is that we are overtaxed today."
True, but other taxes have risen. For example, in most states and counties sales taxes have been either implemented or increased. Also, state and local tax rates have generally risen. Therefore, since the top marginal rate of 90% was paid by relatively few, I'm not sure that the overall income tax burden has been reduced for the average American. It's possible, even probable, that taxes from all sources (eg. the tire disposal tax, higher alcohol and tobacco taxes, etc.) have risen for the average citizen. Further, some of the rate increase has been offset by bracket creep attributable to inflation. Finally, inflation itself is a tax, in a sense.
This is the part that I still don't know. Will there be a VIN database for all the cars that qualify for this bill? That is, given a VIN of a car, a dealer can check the database and determine on the spot whether the car is qualified or not.
I bet when the bill is signed there will be lots of inquires to dealers for the eligibility question.
This is the part that I still don't know. Will there be a VIN database for all the cars that qualify for this bill? That is, given a VIN of a car, a dealer can check the database and determine on the spot whether the car is qualified or not.
Well the last I heard, only cars 1985 and newer are eligible. And the EPA ratings for any 1985 and newer car are just a couple clicks away at http://www.fueleconomy.gov.
FWIW, they also have data for 1978-84 cars. However, it's just the raw data, and not the downward-adjusted numbers they started using in 1985, or the even further-dumbed down numbers instituted in 2007 that were applied retroactively as far back as 1985.
But the ratings are ambiguous for my car (as I had posted earlier; my car has two possible ratings 19mpg and 18mpg, and which one applies to my car makes a big difference).
I am worried that the dealer takes the 18mpg rating and applies for voucher, and later they call me say sorry there is a mistake: your car is rated 19mpg and you have to pay us the $3,500!
I had a 1987 Caprice! I traded it for my 1989 Cadillac Brougham way back in the day. However, if I did still have my '87 Caprice, it would hardly qualify as a clunker.
Sounds like a new Future Weapons episode in the making ****
But seriously, what about modified vehicles? I have an old 4Runner, for instance, that has just about nothing stock on it any more. How do they determine what MPG it gets short of a test itself? Go by the frame? Go by the engine? Plug the gearing ratios into some fancy calculator? Does it still count if the transmission has been swapped to a different type?
I see nothing in any of the bills that addresses issues like these. And, to the off-road crowd, this is a very big issue as you might imagine.
They're probably going to go by the original EPA estimate for that particular vehicle, regardless of what mods have been done to it. Otherwise, it would be possible (but not economically feasible necessarily) to modify an otherwise efficient car so that it guzzles. For instance, I doubt a PT Cruiser would qualify for the clunker credit. However, I've seen a PT Cruiser or two with a 426 Hemi under the hood. I doubt something like that would break 18 mpg combined! Of course, an example like that would cost a lot more than $4500 to build!
We're not really here to discuss what is fair in paying taxes. But overall the wealthy always pay a high amount of tax. But I don't think they ever paid 90% or whatever it is today - because of loopholes, as that rate is nothing more than marketing to the masses that they are really going after the wealthy. The rich (i.e. - Rockefellers) of about 100 years ago were far wealthier relatively then anyone today. But overall taxes have gone up for all classes of people.
The problem with this plan is that it proposes to take taxes from the typical American taxpayer and give it selectively to 1 million people. I see a problem with the government taking $ from 99% of the people who play by the rules and have spent money to keep and run a cleaner, newer vehicle, and give it to someone who drove a clunker.
Would it be okay for the government to decide that it should tax most homeowners, so that it can then subsidize people who hadn't painted their house? or to pay for landscaping for the worst yard in the neighborhood? This is too socialistic for me.
But if the government wants to give money away, I have to try and get some back too. Thank you all for contributing $1500 to my new Energy Star metal roof.
Too bad I bought my house last year and missed the $8,000 this year , and wish I had a clunker.
I have a better idea - a clunker tax! Instead of giving someone $4,500 to get rid of his clunker throw a big ol' tax on keeping it! They'll throng to the showrooms!
Well, it was a thought....
2015 Mazda 6 Grand Touring, 2014 Mazda 3 Sport Hatchback, 1999 Mazda Miata 2004 Toyota Camry LE, 1999.
The only loophole that I've seen that might work is if two unrelated parties go in partnership to buy a new vehicle where one party has the clunker but doesn't need a new vehicle while the other does need the new vehicle but doesn't have a clunker for trade.
The new vehicle buyer could 'pay' the other partner a premium for the use of the clunker in trade and both parties make out.
But SO WHAT! This partnership accomplishes the same purposes as if only one person owned and traded the clunker;i.e. a) getting a new vehicle sold thus aiding the vehicle makers b) getting a clunker off the road c) getting dealership and ancillary services involved d) increasing state tax revenue due to extra vehicles being sold e) increasing jobs/activities of the automotive distribution network ( truckers, railroads, processors, etc )
A Republican Senator whose name I've forgotten already (Grassley I think), tried to strip the Clunker bill out of the war funding legislation it was tacked on to, but the attempt failed along party lines.
It would be nice to see some way to prevent all these disjointed issues get debated and voted on separately. Can you just imagine the fireworks during budget passing time though?
Does anyone know where to find the final text of this bill which was just passed by the Senate? I want to know if the 1 year ownership requirement is included in the final version. If not, I have no issue with buying a $200 clunker to trade in. I think this is a complete waste of taxpayer money but I'm tired of being left out of the freebies simply because I'm a responsible person and can run my own life without government help.
Edmunds just put out a press release that says the one-year ownership requirement is still in the final bill.
Edmunds also predicts that the bill will not produce the predicted 250,000 sales. I'm not so sure about that. That would work to my advantage if I decide to trade, since that'll keep the dealers from bumping prices up because of demand.
Well that answers that. Once again I lose out on an opportunity to take a bite of government cheese. What really gets me is I just bought a Honda Odyssey two weeks ago and traded in a 1999 Voyager as a clunker.
The only loophole that I've seen that might work is if two unrelated parties go in partnership ...
I guess you didn't read my post from the other day? I know some city neighborhoods where there are cottage industries for frauds - staging auto accidents, regular car thefts ...
Now if I was a criminal, I might offer someone $1,000 to trade in their '86 Crown Vic on a new economy car, and get replacement-value insurance. No Sales tax here to eat into the voucher $, and you have a temporary 30-day registration. Then after about a week that new economy car is stolen - (chopped for parts, or driven in the river); or torched.
When this law takes affect, I'd say about 1 month after you'll see this sort of report on 20/20 or such.
So I see criminals walking away with about $3,500 per clunker traded. There are many desperate people in this economy, or just the regular slugs looking for $ for drugs.
I don't think your scheme would appeal to successful criminals. It's much easier to just find people who want to torch the cars they already own---there are plenty of them out there who are belly up on loans.
Larceny doesn't seem to require a bad neighborhood these days anyway.
Comments
The buyer will have to pay taxes again, unless they are a family member, and the lemon law usually only protects the original purchaser.
Consider the multiplying effects of getting these guzzlers off the roads for 4 yrs let's say.
If at the minimum every one of the traders gave up a 15 mpg ( real world ) guzzler for a 22 mpg vehicle then if on average each driver had been driving 15000 mi/yr the savings each year would be...
1000 gal x 1 million drivers in 2009
682 gal x 1 million drivers in 2010
320 million gallons saved each year in 2010, 11, 12 and 13
That's over 1 Billion gallons of fuel not used by these drivers which can be used by other drivers or which we as a nation simply don't use and thus keep the money at home instead of giving it to Big Oil and propping up the sales of our oil-producing enemies.
That part is finished already. It's been decided.
Now it's only about who gets what and how can this stimulus be best used to generate as much business as possible. The poster to whom you replied is one of the direct beneficiaries but we all benefit as a whole nation this year and into the future.
Sounds like a plan!
Actually if the future generations are smart they will do the same thing that's been done since the national debt first occurred. Ignore it.
The national debt is a boogeyman under the bed. It's not there. What is there is the interest on the national debt. The national debt will never be repaid - ever. It's not intended ever to be repaid. This is called leverage in business. When the notes come due in year 2xxx the principal will be pushed out another 10 or 20 or 30 yrs again. We will have to pay the interest on it but as long as the economy grows and we can cover the interest expense then we're doing fine.
It requires growth in the economy and an increasing revenue stream from a broadening economy with more and more people contributing to it.
The sales or use taxes are a state by state issue. Some states charge tax for gifts between siblings but I think most don't care. Some states only left gifts to relatives transfer tax free, others (like California) will let a sale be tax free. Everyone will just have to check with their local DMV to be sure I think.
Dodgeman07, the clunker law so far requires you to have owned (and insured?) the clunker for one year in order to get a voucher.
I think your 15/22 mpg numbers are way too optimistic. Also, if fuel economy continues to improve, those that would normally wait two or three (or whatever) years to trade their vehicles would buy more fuel efficient cars than those who buy '09 and '10 models due to the incentive. Therefore, over the long term I don't buy the simplistic argument that your numbers suggest.
I believe you have to have owned the car for a year.
Artificial stimulation can be much worse. the reason we are in a recession is because we burst a bubble that was built on artificial stimulus.
Actually if the future generations are smart they will do the same thing that's been done since the national debt first occurred. Ignore it.
Can't ignore it forever. One, the debt isn't a fixed number, it keeps growing. Two, the payments on the debt take up more of the budget all the time. Three, there is only so much money to loan. Loan it to the gov't and there is less capital for the rest of us, not to mention potentially higher interest rates.
It requires growth in the economy and an increasing revenue stream from a broadening economy with more and more people contributing to it.
That is a lot easier said than done. We are actually losing the most productive of our workers, the baby boomers now. The percentage of retirees will continue to grow for years to come.
I hope you're right, for our sake, and that of our children and future generations. However, many people are really concerned about the possibility that the interest on the debt will become too large a percentage of GDP. That will tend to slow the growth you're counting it, won't it? And, if the percentage of interest relative to GDP gets too high, paying that interest would likely become a real burden. Hopefully, we won't go from the high tech bubble, to the housing and derivative products bubble, to the interest on the debt bubble. I have no doubt that Summers, Geithner and Bernanke are very aware of this danger, but the jury's out on whether it'll be politically possible for them to reign in the stimulus when the economy recovers. The risk is that fiscal and monetary restraints could derail the recovery.
I understand that President Obama inherited a really difficult economic situation, so I go along with parts of the stimulus package, in particular the effort to save our financial institutions from a melt-down. So, doing nothing would not have been a good option, in my opinion. Choosing which manufacturing industries to pour money into is a different matter, however, because in the end most of the jobs will be lost anyway. Some of this stimulus money will remain in the U.S., but much of it will end up offshore.
One thing is certain, and that is that we live in interesting times. There are no easy answers.
Not true. Younger Americans are working more hours than ever before, and GDP has grown faster than population. More people under 40 are working two or three jobs than at any point in the last 50 years, and more of us are doing it without the pension plans or health insurance that employers used to provide back in our parents' day. The boomers weren't "the most productive of our workers"--they were the generation that grew up with two strong legs under them: the comfort of post-WW2 corporate security and the backup of a government-provided, taxpayer-funded safety net. Fueled by demand created by the rise of US-based global corporations, many of them earned middle-class wages for essentially unskilled labor--UAW workers, for example. Now, the corporate juggernaut that made such a lifestyle possible is falling apart, and the financial crisis also threatens the government "leg."
The jobs they enjoyed simply don't exist in the US for the post-boomer generation. The retirement of the baby boomers will create a burden for these younger workers like me, but it's not because they're more productive than we are--it's because there are so dang many of them, and because Congress refuses to do anything to reform Social Security.
Thanks for the side trip. We now return to our regularly scheduled rant.
"We now return to our regularly scheduled rant."
What do you mean? We're only up to 2,500 rpm.
I think your response pretty well covers the issue of needless spending to try and stimulate an economy by going deeper in debt. The real issue is interest. If the Chinese quit buying our worthless debt it WILL raise interest rates. Then that wasteful spending becomes an even bigger issue.
Many of the vehicles purchased over the last several years were bought with bogus equity from homes that were not worth what was loaned. We are awash in vehicles right now. I don't think we need to try and get more people into debt with gimmicks like this joke of a Clunker Bill.
I will agree with you. My son is working as a carpenter in Alaska. He is making less than I did 30 years ago as a Carpenter. I did a short stint in the Carpenter's Union. It is a sad state of affairs.
I know he could not afford to trade in his 15 year old 4Runner and take on any more payments. Paying for his home and food is more than he makes right now. I understand the frustration the under 40 crowd must have had last election. Don't expect any miracle cure or change. It will get worse before it gets better. The economy is not going to grow, only the government is growing as the economy is shrinking.
I just learned that "CFC" had too many weird connotations (smog and fried chicken) so the House is calling the clunker bill the Consumer Assistance to Recycle and Save act.
CARS for short.
Shall we put a TARP over it?
I look at it a bit differently. In times when industry cannot do as much, people will expect government to pick up the difference. Is that a reasonable expectation? Politically, yes. Economically, maybe. One thing is for sure: Americans will have different expectations for careers, standard of living, etc. 20 years from now than they do today.
One other tidbit: in the 1960s and 1970s, when the boomers were getting started on their allegedly "most productive" careers, income taxes on the wealthiest Americans were far higher than they are now--the top marginal rate was 90% (today it is 39.6%). So don't claim that the problem is that we are overtaxed today.
Profit margin for the sale will be lower than I had originally planned as you make a very good point about the double taxation. Lemon law and warranty to original owner might effect deal as well. All told, it still could happen...nationwide!!!
Long story short, I've owned, registered and insured the "clunker" for 22 years. I qualify. She doesn't. But the $4500 is sitting there on the table for whomever decides to take it. Now in the hypothetical, I'm not real interested in a new automobile so she takes it and I bank the hour or so of my labor. In reality, it's much different. I'm keepin' the Uncle Sam gift.
Are the baby boomers really going out in droves, though? I haven't seen any official numbers to back this up, but from what little personal experience I've seen, the boomers are staying in the workforce longer than their parents. On my Dad's side, both grandparents retired when they turned 60. On my Mom's side, Granddad retired at 55 (in 1971) and Grandmom at 56 (in 1980). Grandmom did go back to work...not so much for the money but just because it was in her blood I guess. She worked part time with flexible hours so that she could take off on a vacation at a whim if she wanted to. She finally quit completely when she turned 70. My grandmother's cousin also retired in 1980, at 55.
As for my parents and their siblings? Well my Dad just retired last fall, at the age of 62. Both of my uncles on that side, who are older than him and technically not boomers, retired around the age of 62, but both ended up taking on part time jobs for more income. My Mom was going to retire at the end of 2008, just before her 60th birthday, but decided to put it off another year, possibly longer depending on the economy. And she says that once she retires, she'll go back to work. My stepdad is 56, and has no aspirations to retire anytime soon. My uncle, Mom's brother, is also 56, and will probably work until he either dies, his health deteriorates too badly, or he nails it in the lottery.
I remember hearing a lot of hoopla a few years back when the first boomers were about to turn 60, and the landscape was going to change. Of course, that was also 2006 when the economy seemed a lot healthier. I have a feeling though, that they didn't retire in droves as predicted. And many of those who did, have picked up jobs in retirement, so they're not completely out of the work force.
Actually, that brings up a question from me. Once you get old enough to start collecting social security, I know that if you go back to work, once you make too much money, you start losing out on SS. However, are you still paying into social security, if you're working at that age?
Very few people were in that 90% tax bracket. Where they have raised taxes is in a lower range of the middle class. Plus SS and Medicare tax at 7%+ right off the top. Those making under $100k are hit pretty hard by taxes when you look at State, Federal and SS. Add to that nearly 10% sales tax in states like CA, and yes tax is a bigger issue now for the baby boomers than it was in the 1960s. In 1965 my total years tax on $5200 income was $624. I was considered middle class. Of course I did not make what an auto worker in the UAW made. I was a lowly telephone man.
Also, in 1965 you could buy a new car for under $2000. I bought a brand new Toyota Land Cruiser for $2400.
So who will pay the tax bill, if not you and those younger than you? More government will mean more taxes needed and less people paying taxes. Civil servants paying income tax is not a net gain in tax revenue. Look for the same stagflation that hit us in the late 1970s. We are still in better shape than those years. At least for now.
The answer to both questions is yes. If you make over $12k in a year you lose some of your SS benefit. What I am seeing are more retired people volunteering. One hospital here has 875 volunteers. We have a close friend that is 83 and she volunteers at a hospice and the community center. She drives 30 miles to the hospice every Friday. There are baby boomers volunteering in so many areas it is hard to keep track.
Another 70 year old friend does school maintenance on the 3 local schools here in Alpine. They laid off some of the maintenance people due to budget cuts. Yet the maintenance did not go away. He is active in Kiwanis and the school district asked for help with painting, plumbing and general repair. And the Kiwanis are keeping the schools maintained on a voluntary basis. People can have ill feelings about the baby boomers. A big percentage are still carrying a load for free.
If this loophole exists, it could be bad news for the program
If I wanted to pull this stunt where I live, in Maryland, that $200 Caprice would probably cost another $150-200 by the time I was done getting the title and tags for it. An '87 Caprice is old enough to qualify for historic tags in Maryland, which are cheaper than regular, plus exempt it from needing an inspection or emissions testing. If it was new enough to not qualify for those tags, you'd be looking at around $190 for tags, versus $51. And to get a $200 clunker to pass inspection, well you might get lucky and only have to sink a few hundred $ into it. Or you could blow $1000 or more, depending on how much of a piece the car is.
Then you have to insure it for a year. In my case, that car would run around $300, to add it to my policy. Also, the car has to be running when you trade it in. I guess if you can just limp it to the lot and it dies there, they might make an exception.
So basically, for me to pull a stunt like this, it would cost $650-700 minimum, plus a few hours of time at the DMV. Plus having to hold onto the car for a year, and hoping that it doesn't have some catastrophic breakdown in that year that disables it so it can't be driven to the dealer. For instance, if the engine or tranny on that car dies, you could be looking at several thousand $ to repair it, unless your handy enough to get used tranny or engine and do the work yourself. Then you have to factor in all the time you spent doing that.
Is all that worth it for $4500? For some, it might be. But I wouldn't want to deal with that hassle.
Now for the person who already owns that '87 Caprice, provided it still runs and they've had it for at least a year, they can just take it to the dealer, trade it, and be done with it without any fuss. And that's how the bill is intended to work.
So while this cash for clunkers thing can be abused, I don't think it really lends itself THAT easily to it.
Will the program be abused? Of course that is how Congress writes all legislation.
And your point about parking restrictions is a good one. Personally, I could probably get away with letting something like that sit indefinitely, as long as it either has tags on it, or is hidden away well enough. But, not everybody has that option!
The only way I can afford to buy new would be if the cash-for-clunkers bill goes thru. It seems they're making this bill just for me. I hope it passes soon. And if it does pass, a big thank you to tax payers!
True, but other taxes have risen. For example, in most states and counties sales taxes have been either implemented or increased. Also, state and local tax rates have generally risen. Therefore, since the top marginal rate of 90% was paid by relatively few, I'm not sure that the overall income tax burden has been reduced for the average American. It's possible, even probable, that taxes from all sources (eg. the tire disposal tax, higher alcohol and tobacco taxes, etc.) have risen for the average citizen. Further, some of the rate increase has been offset by bracket creep attributable to inflation. Finally, inflation itself is a tax, in a sense.
I bet when the bill is signed there will be lots of inquires to dealers for the eligibility question.
Any inside info from dealers who read the forum?
Well the last I heard, only cars 1985 and newer are eligible. And the EPA ratings for any 1985 and newer car are just a couple clicks away at http://www.fueleconomy.gov.
FWIW, they also have data for 1978-84 cars. However, it's just the raw data, and not the downward-adjusted numbers they started using in 1985, or the even further-dumbed down numbers instituted in 2007 that were applied retroactively as far back as 1985.
But the ratings are ambiguous for my car (as I had posted earlier; my car has two possible ratings 19mpg and 18mpg, and which one applies to my car makes a big difference).
I am worried that the dealer takes the 18mpg rating and applies for voucher, and later they call me say sorry there is a mistake: your car is rated 19mpg and you have to pay us the $3,500!
There must be a better and unambiguous way besides the http://www.fueleconomy.gov data.
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But seriously, what about modified vehicles? I have an old 4Runner, for instance, that has just about nothing stock on it any more. How do they determine what MPG it gets short of a test itself? Go by the frame? Go by the engine? Plug the gearing ratios into some fancy calculator? Does it still count if the transmission has been swapped to a different type?
I see nothing in any of the bills that addresses issues like these. And, to the off-road crowd, this is a very big issue as you might imagine.
The problem with this plan is that it proposes to take taxes from the typical American taxpayer and give it selectively to 1 million people. I see a problem with the government taking $ from 99% of the people who play by the rules and have spent money to keep and run a cleaner, newer vehicle, and give it to someone who drove a clunker.
Would it be okay for the government to decide that it should tax most homeowners, so that it can then subsidize people who hadn't painted their house? or to pay for landscaping for the worst yard in the neighborhood? This is too socialistic for me.
But if the government wants to give money away, I have to try and get some back too. Thank you all for contributing $1500 to my new Energy Star metal roof.
Too bad I bought my house last year and missed the $8,000 this year
Well, it was a thought....
The new vehicle buyer could 'pay' the other partner a premium for the use of the clunker in trade and both parties make out.
But SO WHAT! This partnership accomplishes the same purposes as if only one person owned and traded the clunker;i.e.
a) getting a new vehicle sold thus aiding the vehicle makers
b) getting a clunker off the road
c) getting dealership and ancillary services involved
d) increasing state tax revenue due to extra vehicles being sold
e) increasing jobs/activities of the automotive distribution network ( truckers, railroads, processors, etc )
It would be nice to see some way to prevent all these disjointed issues get debated and voted on separately. Can you just imagine the fireworks during budget passing time though?
Cash for Clunkers Nears Passage (AutoObserver)
Edmunds just put out a press release that says the one-year ownership requirement is still in the final bill.
Edmunds also predicts that the bill will not produce the predicted 250,000 sales. I'm not so sure about that. That would work to my advantage if I decide to trade, since that'll keep the dealers from bumping prices up because of demand.
I guess you didn't read my post from the other day? I know some city neighborhoods where there are cottage industries for frauds - staging auto accidents, regular car thefts ...
Now if I was a criminal, I might offer someone $1,000 to trade in their '86 Crown Vic on a new economy car, and get replacement-value insurance. No Sales tax here to eat into the voucher $, and you have a temporary 30-day registration. Then after about a week that new economy car is stolen - (chopped for parts, or driven in the river); or torched.
When this law takes affect, I'd say about 1 month after you'll see this sort of report on 20/20 or such.
So I see criminals walking away with about $3,500 per clunker traded. There are many desperate people in this economy, or just the regular slugs looking for $ for drugs.
Larceny doesn't seem to require a bad neighborhood these days anyway.