Friday, August 07, 2009

Cash for lunkheads

A present from Joe and Jane Taxpayer

Andrew Sullivan publishes the following email from one of his readers:
August, 2001: In the backyard of our modest home, we erect the "George W. Bush Memorial Jungle Gym" for our four kids, purchased at Toys R Us with our $600 Tax "Rebate" (which later came out of our potential tax refund, if I remember correctly).

August, 2009: Sitting in our driveway is our new gas efficient, and more importantly, reliable, Honda CRV purchased ONLY because of the new $4500 Cash for Clunkers program. Contrasting the two in terms of helpfulness to our family finances:

2001: we really didn't need the jungle gym. We had a two-income family at the time, and could have afforded to buy the thing had we prioritized it. Later that fall, I unexpectedly lost my job and began what has become an eight year journey back from economic hell. Had I known, I would have put the damn check in the bank.

2009: We have struggled, but as of this year, we are finally able to pay all our bills and not have to rob Peter to pay Paul. We (my husband, me and my two college age sons) have been driving vehicles for years that were paid for, but ranged in age from 12-18 years old, were gas guzzlers, and constantly required expensive major repairs. After I graduate in December with a BS degree in nursing, I have had offers and expect to work right away. What has been years of fear, compulsive avoidance of spending or accruing credit debt, literally not being able to pay utility bills and buy groceries, we had a definite sense that we would drive our vehicles until their wheels flew off (that literally did on one) before giving ourselves another car payment.

However, this month, all that fear gave way to a sense that this was the opportunity of a lifetime, that things are getting better, and that this purchase was a necessary and reasonable risk. You do the math on the benefits to our economy from the two. Bush put us into the national crisis we are in right now.

Obama's plans will slowly, but steadily bring things back.
A few observations:
  • I doubt this woman had her four children delivered by a stork.
  • She self-admittedly chose to waste her $600 tax refund.
  • She says that she would have have placed the check in the bank had she known she was going to lose her job. But isn't that why you save money in the first place, for unforeseen events?
  • She chose to purchase two unreliable gas guzzlers. (Gas efficiency is prominently displayed on all new cars while numerous resources exist to help assess car reliability prior to purchase)
  • A Honda CRV starts at over $21,000. Even with cash for clunkers she is still shelling out at least $16,5000. If she has that kind of money why can't she buy a decent used car?
  • It's rather ironic that she talks about avoiding robbing Peter to pay Paul, when that is exactly what she is doing by taking money from the taxpayers.
Update: Further thoughts on the program's environmental benefits.

Update: More from Richard Rahn.

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