Aug. 9--There's no question that the Car Allowance Rebate System -- known as cash for clunkers -- is a jolt many car dealers needed during one of the worst times in memory for the auto industry.

The popular short-term view is certainly positive. The idea is to take old cars off the road, with inducements of $3,500 to $4,500 per vehicle and replace them with newer, leaner vehicles.

The reports about would-be customers flooding showrooms are well-documented. There seems no question that C4C has injected some life into the moribund auto industry.

But at what cost?

Consider some reasons the C4C does more harm than good:

1. Why take some old cars off the road and not others? The worst offenders, built before 1984, don't qualify.

2. Attrition would remove old vehicles from the road anyway, without artificially speeding up the process at a cost of billions.

3. Destroying old cars and their parts simply inflates the prices of parts the existing fleet needs. This is sure to hurt salvage yards. And higher prices for parts and used cars amount to a de-facto tax increase on the poor, who can't afford a new car under any circumstances.

4. C4C cuts the supply of used cars for consumers who can't afford to buy new or even a used late model. The result? Higher used-car prices.

5. Buying a new car is one thing; keeping up the payments is quite another, especially in a recession. A good guess is that many buyers are not paying cash for a new vehicle while swapping a paid-for clunker. Not good in an already grossly debt-obese society.

6. The ostensible purpose of C4C was to prop up an ailing domestic car industry. According to federal government's own estimates, imports accounted for 53 percent of C4C sales.

7. C4C is supposed to save the planet. But instead of recycling reusable parts from clunkers, the program directs old cars to the crusher. There is nothing eco-friendly about abject waste of reusable materials. In Iowa, there are recycling programs for everything from soda bottles to used furniture. Why not car parts? Think of the energy needed to build a vehicle from scratch.

8. Where does it end? Congress was trying to move quickly to inject $2 billion of fresh funds into C4C after it had reportedly burned through its allotted $1 billion in less than a week. The program was originally designed to last through October. Of course, the politicians underestimated its cost.

9. What of the normal dealer incentives? How many discounts will be scuttled when Detroit decides the government-funded inducements are enough? C4C is culling a lot of dealer inventory itself, at a time dealers are typically hyper-motivated to move iron off their lots.

10. Uncertainty that a particular trade-in will be approved for the C4C program, after submitting the mandatory paperwork for lengthy processing, has turned some dealers away from the program. "It reaches a point where, for us, it doesn't make good business sense," a Toyota dealer told the New York Times.

No one is here to throw any wet blankets on anybody's much-needed profits; just remember that every action produces an equal reaction, whether anticipated or not.

Short-term gains are great. But Band-Aids don't cure broken arms.

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Copyright (c) 2009, Waterloo-Cedar Falls Courier, Iowa

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