'Clunkers' program: A preview of government-run health care

You don’t need a crystal ball to figure out what government-run health insurance will look like — just take a look at the cash-for-clunkers program, brought to you by those efficiency experts at the Department of Transportation and its administrative handmaiden and newest taxpayer acquisition — Citigroup.

Just six days after the clunkers program launched, it became apparent to DOT officials that they didn’t know how much of the $1 billion allocated to the plan had been spent.

via ‘Clunkers’ Rebates at Risk Unless Senate Acts – WSJ.com.

Hansel and Gretel are probably better at keeping track of their way in the woods than a federal bureaucracy is at keeping track of disbursements. Think AIG and $173  billion in taxpayer handouts. Wonder where the money went? Can’t say or won’t say. It’s just like the old toothpaste jingle only it’s not yellow that’s disappearing, it’s green:

[youtubevid id=”7_G0pUkf_ws”]

“You’ll wonder where the yellow went when you brush your teeth with Pepsodent.”

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17 thoughts on “'Clunkers' program: A preview of government-run health care

  1. “You don’t need a crystal ball to figure out what government-run health insurance will look like”

    You want to actually back up your premise with some facts or are we just supposed to accept your statement on face value?

  2. Nancy,
    I’ve seen lots of folks commenting that the CARS program doesn’t auger well for health care reform… but what’s the correlation?

    Seems the biggest sin of the CARS program was that the administration underestimated how popular it would be. Otherwise, both consumers and car dealers seem to be pretty happy.

    Why should that scenario worry me?

    • My unsubstantiated guess would be that we should worry because the costs will be a lot greater than current estimates. And current estimates are very high. And we won’t really know the particulars of how the money is being spent.

      CARS has been a success for dealers and consumers. That’s good. Underestimating this success by the margin it’s been underestimated is what should give pause.

  3. Under estimating the success of a govt program should be the worst of our problems!

    14,000 people are losing their health care coverage daily, over 40 million Americans have already been priced out of the market. What do we hear, this constant drone over what the price tag will be. No constructive input, just an unyielding drone over costs and “socialized” medicine. Goes a long way in showing just what people’s values are.

    How about a cheer for a program that is going a long way in jump started an industry that a few months ago was on the verge of collapse. How about a sigh of relief over the fact GM announced it’s reopening 2 factories in Michigan and 1,500 people are being called back to work. Nancy you’re “new” Wall St. doesn’t sound all that much different from the old one.

    • Thank you one and all for your responses. The car-for-clunkers program should give us pause for several basic reasons: It is hopelessly retro, trying to get everyone back into old car-buying habits rather than signaling some deep thinking about how we as a nation should be transporting ourselves; the program, although a drop in the bailout bucket, is far more costly than many realize; and it was sloppily thrown together even though there are other examples of more successfully run programs overseas.

      The car industry is in a mess for many reasons. Now would be an incredible time to re-think public policy on transportation and energy. In theory, this program is environmentally friendly. It may be — but not to the extent that many assume. The cars traded in get destroyed — no recycling of parts. It takes a lot of energy to create new cars — and perhaps we should be heading to a new secular phase of fewer cars and more public transportation. The Oil Drum blog says if you accept all the government assumptions about the types of vehicles traded in here’s what happens to our dependence on oil: “We have just extended our dependence on gasoline/oil transport by 140 billion miles which at 25 mpg (irrespective of the efficiency gain), is 5.60 billion gallons of gasoline. When we import 70% and rising of our oil and pay for it with a currency that doesn’t inspire quite the confidence it once did, this gimmick goes in the wrong direction.”

      Last night on the MacroTwits hour, oil expert Gregor Macdonald called the program a “very human reaction” to “put fingers in the dikes and try to prop up that which isn’t working and the cash-for-clunkers is.” Macdonald wonders if others shouldn’t have been given an opportunity to buy the used cars. Another MacroTwits participant noted that on an economic level, buyers have traded in $30/month in gas savings for $180/month in new car payments. The cars aren’t free.

      Then there’s the cost to us, the taxpayers. David R. Kotok (chief investment officer of Cumberland Advisors) blogs on The Big Picture about what he calls “clunker-nomics.” The economics highlights all the incentives that lead us to make decisions that may look superficially good but don’t stand up under closer scrutiny. Consumers and dealers obviously love the CARS program. Consumers appear to get something for free (money!!) and dealers get more business. Sounds good. Their perspective is very short. Congress signs on to it. The average perspective there: two years. The financial cost on even this small program: about forever and if boosted to $4 billion, Kotok estimates it will pick the pockets of taxpayers to the tune of $100 million/ year in interest costs on the debt. True, it’s only a rounding error. Or not even that on our national debt. But to me, that’s a lot of moolah.

      So, let’s get back to health care. For the record, I view health care insurance as a utility — it’s something everybody should have access to — like electricity or water. Private industry has proved itself capable of screwing up big time. But, if the government would allow it, capitalism cleans up the losers and allows the more creative and fertile minds to present solutions. I think the feds should be thinking in terms of creating incentives to private industry to make health care insurance available to one and all (and, or course, those incentives need to be carefully thought through). But a government-run program? No, thank you.

      • “. But, if the government would allow it, capitalism cleans up the losers and allows the more creative and fertile minds to present solutions.”

        Oh so now it’s the govt’s fault that the private insurance industry is screwing the American people left and right, give me a break. Are you getting your talking points from Fox News? You are spouting the same false argument they are. The market place has had over 50 years to get the health care issue right, and your response it give them more freedom. If you don’t want to take part in a public run health care plan no one is forcing you to. But at least have a little more respect for your readers than to try to sell us the same tired right wing arguments that have led us to the disaster that is now the American health care system. And btw the next time you are the victim of a crime, call a private security company, calling the police would only make you a hypocrite.

      • “I guess Congress and its staff shouldn’t call the police either — our illustrious elected officials have exempted themselves from national health care.”

        Huh? What are you talking about?

      • Members of Congress will not be part of the national health care plan they are working on now unless they specifically opt out of their coverage from the Federal Employee Health Benefits Problem. Congress often does this: enacts legislation for its constituents, but makes an exemption from the law for members. There is currently a resolution from the House asking anyone who votes for the new health care legislation to withdraw from the federal benefits program and sign on to the national health care program.

    • Hey Brian,
      My larger point is that government messed up on a simple program which casts doubt on its ability to deliver on something far more complex — whether you support this particular reform or not.

      The health care deal was thrown together too hastily and is a mess — much like the cash-for-clunker program. The clunker program — easier to dissect in a short space than health care — doesn’t do a great job on the ecological scene and is based on questionable economics. Barron’s has a pretty amusing analysis of cash-for-clunkers online this week: http://online.barrons.com/article/SB124931671451601915.html

      The health care legislation has been too rushed and much of the debate behind closed doors. It’s probably much more expensive than Obama suggests (even the Congressional Budget Office thinks so) and it’s not clear that it meet it’s goals even at the higher price tag. I am glad that something so important didn’t get rushed through Congress (Obama had championed passage before the summer break.)The debate needs to be more careful and less politicized — though that’s probably not possible.

  4. I agree, Ms. Miller. People are being intellectually dishonest with themselves when they ignore the fact that health care reform will cost trillions of dollars over the next 10 years. All of this spending is really frightening and the size of our national debt continues to grow. The value of the dollar is currently at stake and people either don’t understand that, or they don’t care. Think the economy is bad now? Just wait until its time to pay back that debt!!

    I like your cash for clunkers analogy. Just another example of how our government continues to borrow/print money like there is no tomorrow. The problem is, there will be no tomorrow if they continue to do this. It is all smoke and mirrors. Where do people think that money comes from??

    We need health care reform, but long term cost-benefit analysis is something that many members of Congress and the Obama administration are not focusing enough of their attention on. Maybe they are focusing on it, but they are not making it public because they are too concerned with the political ramifications of not passing a health care bill.

  5. The cash for clunkers program is working, spin it anyway you want, scrape the bottom of the barrel till your knuckles bleed, you’re not slowing down health care reform so you and the rest of your “new” wall st. buds can shove more cash into your pockets while 10s of millions American live in fear of what getting sick will do to their families.

    And after health care we’re moving on to cap and trade, then regulations for the markets. Your tea bag rhetoric isn’t working, your side really needs to come up with a better argument than “more of the same”.

    • Hold on a minute, exactly who is the “cash for clunkers” program working for? It boosted sales for the auto industry for a couple of days, but that doesn’t mean anything over the long run. What happens when the program stops? Throw more money at it? No, sales will go back down and anyone who got their job back will only lose it again. It does not make any sense to do this. It only prolongs the agony of a true correction in the market. That is not a talking point, that is just good, solid economics. We cannot continue to print bills and throw it around as if there will be no ramifications. If government can truly create wealth, then why don’t they just do it all of the time? Because it doesn’t work over the long run.

      • No one is talking about the long run, this is all about giving the industry a boost so it can survive to as you put it, until the market straightens out. Not to mention the added benefit of getting rid of a lot of gas guzzlers, this program is a win all around.

      • But I think we should be talking about the long run. That is where we need to be careful. I know that we are in the middle of a severe recession, but it always scares me when government throws money around like they have a printing press…err…um…yeah.

        Seriously though, it is going to take a lot of time and many, many tax increases in order to pay down our current debt. I just don’t think it is wise to bail these big companies out. They screwed up, so let them fail and someone else will come along and do better. That just makes more sense to me.

      • When the economy is in trouble the best thing the govt can do is “throw money around”. And when things settle down I’m sure the administration will put the regulations in place again to make sure wall street (both the old and new) can never screw the country as they did over the last 8 years and then some.

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