Pixel Tracker

Monday, February 18 , 2019, 9:43 am | Fair 51º


Larry Kudlow: Vote for the Clunkers

The car-rebate program has buoyed Americans' spirits in giving them a good bang for the buck

As a free-market capitalist who doesn’t believe in artificial spending and pump-priming from Uncle Sam, I’m going to eat a little crow with the following statement: At this moment in history, if we’re going to use fiscal stimulus as Washington insists, I favor extending the cash-for-clunkers car-rebate program.

Larry Kudlow
Larry Kudlow

With the greatest respect for my conservative friends and colleagues who totally disagree with me, here’s why.

In virtually no time, the clunker program has become a national pastime. It has captured the public’s imagination in a way that no other federal stimulus has. Everyone is talking about it. And I truly believe that consumer spirits have been buoyed by the prospect of going out and buying a new car — even with federal assistance, and even under the duress of federal mileage standards.

After a very dreary year or two, people might just have fun trading in their clunkers and buying something new.

Even today, as unfashionable as it sounds, and given Washington’s attack on horsepower, Americans are still in love with automobiles. They still like going to showrooms, checking out the new models, inhaling the great new-car smell and, yes, kicking the tires and making a buy. Cars may no longer be the heart of our economy — that’s all techie, information gadgets now. But folks still love the car thing.

Now, I wouldn’t want the government to pass out free money for everything. But in this particular case, the cash-for-clunkers rebate program is working. It’s working so well that it’s running way ahead of the computers that are administering it at the Transportation Department and Citibank.

Well, sure. That’s government for you. But unlike most of the rest of the fiscal-stimulus plan, this program actually works because the federal cash rebate actually contributes to a consumer purchase. It’s not just another welfare-type transfer program.

Incidentally, with all those people rushing into dealer showrooms, the ones who can’t afford new cars are buying used cars. Used car prices are up substantially this year, a healthy sign for the entire auto business.

And carmakers are going to have to ramp-up production in order to meet the clunker trade-in demand, which could well mean better employment — something we desperately need. Plus, in addition to fueling better job creation and higher incomes, this process could generate rising tax revenues from the sale of the cars.

And the price tag of the program is a mere $2 billion compared with the trillions of dollars Washington has been wasting. So, for once in our lives, Washington spending is giving us a good bang for the buck.

The biggest trade out there seems to be selling the Ford Explorer and buying the Ford Focus. Of the top-five-purchased higher-mileage cars that qualify, Toyota has three — the Corolla, Prius and Camry. The Prius is made overseas, but the other two are manufactured mostly in the United States. The No. 3 trade, the Honda Civic, is made in Indiana, while the Dodge Caliber and Chevrolet Cobalt rank in the top 10.

Yes, as for the Chevy, it is a little bizarre that the government that owns General Motors Corp. is in effect paying itself. So it goes. It ain’t perfect.

And yes, it’s quite possible that government rebates today will steal car sales from next year. But let’s cross that bridge next year when the bull market recovery hopefully will be stronger.

Right about now you’re probably saying, “Well, why not just spend another $100 billion and give consumers checks for everything?” Or, “Why not spend another trillion?” Well, I don’t want to go there. Just this one cash-for-clunker program — that’s all I want. Fund it again for a couple of billion dollars more.

I mean, look, if I had my way, that trillion-dollar stimulus plan from President Barack Obama would have gone to a six- or 12-month tax holiday for everyone. But alas, that’s not how the political ball bounced. At least for the clunkers, there’s a plan that has caught the public’s imagination and makes for a reasonable amount of economic success.

So I invite my Republican friends in the Senate and my conservative friends everywhere to push for the clunkers.

Ralph Waldo Emerson once said, “A foolish consistency is the hobgoblin of little minds.” So I acknowledge that I am not being consistent. But I do actually believe that the new bull market in stocks and the onset of economic recovery will both be helped by improved consumer spirits, better car sales and maybe even a new job or two for the American work force.

And now I will try to regroup and go back to being a pure free-market-capitalist supply-sider.

Larry Kudlow is the founder and CEO of Kudlow & Co. LLC, an economic research and consulting firm in New York City, and host of CNBC’s Kudlow & Company. Click here for more information, or click here to contact him.

Talk to Us!

Please take Noozhawk's audience survey to help us understand what you expect — and want — from us. It'll take you just a few minutes. Thank you!

Get Started >

Support Noozhawk Today

You are an important ally in our mission to deliver clear, objective, high-quality professional news reporting for Santa Barbara, Goleta and the rest of Santa Barbara County. Join the Hawks Club today to help keep Noozhawk soaring.

We offer four membership levels: $5 a month, $10 a month, $25 a month or $1 a week. Payments can be made using a credit card, Apple Pay or Google Pay, or click here for information on recurring credit-card payments and a mailing address for checks.

Thank you for your vital support.

Become a Noozhawk Supporter

First name
Last name
Select your monthly membership
Or choose an annual membership

Payment Information

Membership Subscription

You are enrolling in . Thank you for joining the Hawks Club.

Payment Method

Pay by Credit Card:

Mastercard, Visa, American Express, Discover
One click only, please!

Pay with Apple Pay or Google Pay:

Noozhawk partners with Stripe to provide secure invoicing and payments processing.
You may cancel your membership at any time by sending an email to .(JavaScript must be enabled to view this email address).

  • Ask
  • Vote
  • Investigate
  • Answer

Noozhawk Asks: What’s Your Question?

Welcome to Noozhawk Asks, a new feature in which you ask the questions, you help decide what Noozhawk investigates, and you work with us to find the answers.

Here’s how it works: You share your questions with us in the nearby box. In some cases, we may work with you to find the answers. In others, we may ask you to vote on your top choices to help us narrow the scope. And we’ll be regularly asking you for your feedback on a specific issue or topic.

We also expect to work together with the reader who asked the winning questions to find the answer together. Noozhawk’s objective is to come at questions from a place of curiosity and openness, and we believe a transparent collaboration is the key to achieve it.

The results of our investigation will be published here in this Noozhawk Asks section. Once or twice a month, we plan to do a review of what was asked and answered.

Thanks for asking!

Click Here to Get Started >

Reader Comments

Noozhawk is no longer accepting reader comments on our articles. Click here for the announcement. Readers are instead invited to submit letters to the editor by emailing them to [email protected]. Please provide your full name and community, as well as contact information for verification purposes only.