Monday, August 3, 2009

Unintended Consequences

I saw a friend at Village Pizza today, someone in the used car business. As we talked, he brought up the federal "clunkers" program. As a car dealer, he had some interesting insights on the program.

The program actually mandates that the old cars be destroyed, not repaired or refurbished. I have seen some photos of cars waiting to be crushed. I also saw on Fox News' website a clip of a nice looking Volvo being disabled. Somehow the clunkers program mandated that such cars be rendered inoperable. The video showed a mechanic in the driver's seat, flooring the car while it sat in neutral, hood up. It only took a few minutes for the engine to begin smoking and fail. Did they have to do that before they crushed the car? I don't get it.

While getting such vehicles off the road may be a noble idea, it seems like a terrible waste to me. I actually thought about turning in my '94 Taurus for a newer vehicle. But I don't think I could bear to think about it being crushed as junk. It still has plenty of life in it!

My friend said that these old vehicles could be fixed up and resold to people who need cheap transportation. This would put lots of people to work, repairing, cleaning, and reselling these cars. It would be a good use of resources.

I also thought that these cars could be shipped to developing countries where they need any kind of vehicle. Many of these older cars have less complex engines and can be repaired as needed in the field.

But instead, the vehicles are just crushed -- wasted. Yes, they do pollute, but so do the newer cars. The value of putting these vehicles to work would outweigh the damage they may do to the environment. Imagine the poverty that could be eliminated with a few good machines in a developing community. Think of hundreds of communities where poverty is diminished, and you can also imagine people who treat the environment much better.

And there is another unintended consequence. The glut of the clunkers in the metal recycling system is pushing down the price of scrap metal. Those who made their living with recycling are being driven out of business. This damages the long term recycling industry and potentially puts people out of work.

I think I'll hang on to my car. I'm getting ready to turn over to 200,000 miles. Maybe I can get another 100k out of it.