Homeowner's Blog

More Cash for More Clunkers?

One of the objectives of the nearly $1 trillion budgeted for the federal stimulus program was to get the money into the economy quickly in order to head of another Great Depression. The $1 billion that Congress appropriated for its Cash for Clunkers program was gobbled up by new car buyers in a matter of weeks. The pluses of the Cash for Clunkers program are that it has gotten stimulus money into the economy very fast, targeted the bennies to a severely impacted segment of the economy (autos), helped middle class consumers who typically own clunkers, and helped the environment.

With early signs of nascent recovery still inconsistent, putting more money into a quick impact effort like this to reinforce the early positive economic signs still makes sense. On the flip side however, we need to start thinking about the effect of some of the other budgeted stimulus funding that won't kick in until next year. If the recovery does take hold this year, as we all hope, the additional stimulus spending next year may not be necessary, and could even prove inflationary.

We should keep a close eye on the economy over the next year. It may well be healthy enough by next year that we will want to cancel some unneeded stimulus programs that have not yet kicked in. That could save us substantially more than the $2 billion we're spending on extending cash for clunkers for another couple of months. Let's hope this Cash for Clunkers spending now helps further shore up the recovery. The result could be a win-win for everyone, helping to make it possible to cancel even larger amounts of the unspent stimulus spending next year and reduce the federal deficit!

Bruce Hahn
American Homeowners Grassroots Alliance