Cash for Clunkers has come and gone...and it seems everyone is just all jazzed up about how great a success it was.

But with anything that comes out of our Federal Government, there are always unintended consequences that people fail to see until well after the fact.

While the program was in effect, there were several problems...including difficulty for dealers trying to submit the paperwork and the gross underestimation of how much demand there would be for the program.  Not to mention the fact that the majority of the dealers who did the actual deals have yet to get paid and will remain on the hook for the money until the Feds cut them checks.  (Dealers operate on VERY tight margins...and too long a wait could be catastrophic for many of them).

Additionally...some of the cars that were junked were in good working order for the most part.  How many people across the USA don't have transportation at all?  I'm sure there might be a single mom or two out there that can't manage to get the kids to daycare and themselves to work without having to rely on some sort of alternate transportation to get through their day.  When you think about it a car is an asset...and destroying one that is otherwise working is akin to burning a pile of money.

Now that the program is over, we find out that the majority of the cars sold were from foreign manufacturers.  Sure, many of these cars were built in the USA, and they were sold here which means local employment and tax revenue, but the overall goal of stimulating the US auto industry, and out overall economy, was not met.

A quick snapshot of the purchases reveals that most of the people who bought cars during the program were likely going to purchase a new car anyway...and simply took advantage of the free money.  Most of the cars purchased were from existing inventory...and at the same time we just squashed demand for new cars since those who were going to buy in the medium term pushed up their purchase to get in on the free cash.

And when you stand back and look at the "circle of life" in this thing you can't help but shake your head.

The government borrowed against future tax revenues (decades into the future mind you) in order to bail out GM and Chrysler...and then borrowed more to fund a program that will in effect kill demand for new cars over the next several months...all while destroying assets in the form of working autos. 

So why did we do this again?

At best we propped up a few car dealers in the short term.  At worst, we've taken money from future generations and used it in an elaborate shell game aimed at making several political interests happy.  (unions and the green movement).

Now I hear "Cash for Clunkers...the Home Appliance Game" is around the corner.

Ugh.