Friday, August 21, 2009



The Obama administration has informed us that it will terminate the Car Allowance Rebate System (“CARS”), better known as “cash for clunkers” on the evening of Monday, 8/24 at 8:00 PM EDT. My utter astonishment at the “success” of the program, along with some lessons that “success” holds for our entire economy, was reported in my now seminal 8/1/09 piece, “SOMEWHERE, (BE CERTAIN WITH) LINN BURTON IS SMILING.” As the program winds down, there are additional, largely political, lessons to be drawn from the program, some perhaps obvious, others not so obvious.

First, if the government had originally put all, or even a decent fraction of, the money it put into bailing out GM and Chrysler into a CARS type program, the bailouts would not have been necessary. Not that I am advocating such an approach, but if the Bush/Obama administration decided that it wanted to use a fire hose to direct money at the car business (which it could hardly NOT do after it gave the financial industry the old five alarm treatment), something like cash for clunkers would have been a less intrusive, and more effective, approach than a wholesale socialization of the business. Perhaps that is why CARS was not proposed earlier; think about some of the players’ attitudes toward the private sector, and especially toward Detroit, and those players’ more nefarious potential motivations.

Second, while the timing of the CARS program may or may not have been good from an economic standpoint, it was abominable, for the Obama administration’s perspective, from a political standpoint. The bumbling, maladroit handling of this program (See the next paragraph.) has given plenty of ammunition to those who argue, with now even more abundant justification, that if the government and/or the Administration cannot handle a $3 billion temporary program designed to provide one industry with a shot in the arm, how can it be expected to handle our nation’s entire health care system?

Third, the condescending, snide comments of Transportation Secretary Ray LaHood provide yet another example of that worst possible combination of attributes, arrogance and cluelessness, that is seemingly endemic to our public servants. Car dealers are growing increasingly concerned about getting paid late, or not getting paid at all, the money they advanced to customers based on the government’s promise. (Why anyone would trust a promise from the government any more than a sprightly young lass would believe the entreaties of young predator who promises that he will respect her as much in the morning is beyond me, but what choice did the typical car dealer have, when his competitors were glomming onto CARS like ants on watermelon rinds at a picnic?) The dealers’ fears and dissatisfaction are more than justified. As of yesterday (i.e., Thursday, 8/21), the government had processed only 170,000 of the 457,000 applications for CARS reimbursements it had received from dealers. Only $145mm of the $1.9b owed had reached dealers. So what does Secretary LaHood, once a prominent Republican congressman from my home state, now conveniently put in charge of ladling out “stimulus” money for road projects by a Democratic administration (Two parenthetical points: First, don’t you just love the politics of Illinois (or, for those of you who live here, wouldn’t you just love the politics of this state if you didn’t have to pick up the tab)? The book is on the way! Second, many Republicans will assert that Mr. LaHood, even when he was in the House leadership, was not a “real” Republican, whatever that means in the post-Bush era. I have an interesting story concerning a guy WAY HIGH UP in Republican national politics that is tangentially related to Mr. LaHood, but I will save it for another time because this post is already too riddled with parenthetical, or simply tangential, comments, and to relate this tale will look too much like name dropping. Further, I might want to use a laundered version of the story should my book “The Chairman: A Novel of Big City Politics” ever sell enough copies to merit a sequel.), say? I have to paraphrase here because I heard the comment on CNBC but did not see it in print and so can’t quote it directly:

Some people, if you threw them a life preserver, would complain about the color of the life preservers.

What a despicable, full of himself, out of touch, supercilious, pompous popinjay! These are small business people who don’t have regular access to the Treasury that in turn has access to the taxpayers’ wallets and a Fed ever ready to put the printing presses in hyper-drive in order to buy the Treasury’s debt. These dealers have to actually manage cash flow, a task, and a concept, completely foreign to Mr. LaHood and his ilk in both parties. Mr. LaHood’s condescending, or worse, comments regarding the dealers that the federal government has taken right to the brink of insolvency reflects a yawning, yet still growing, disconnect between the political class and the people it governs. As both parties come to be dominated by people who have never come closer to the private sector at least one of them lionizes (from a VERY safe distance) than a certain minor league club on the north side of Chicago has come to the World Series, we are going to get more people with Mr. LaHood’s attitude. Unfortunately, we will continue voting for these poltroons.

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