"Cash for Clunkers" program to be cut off this Monday, 24 August 2009 (Update)

When I was out in Ohio a few weeks ago my father-in-law and I discussed the “Cash for Clunkers” program and he already knew what wouldn’t be reported in the news for several days: dealers weren’t getting paid as they were promised. In his part of northern Ohio there aren’t a huge number of dealers around and he’s bought enough cars over the years to be recognized at most of them. His conversations with those dealers made him aware that many clunkers submissions had been made by the dealerships but that practically none of them had been paid off. After weeks of time and after slogging through blizzards of paperwork the submitted deals were still in limbo and there just wasn’t anyone responding to requests for information.

Then came the hurried legislation adding another chunk of cash to the program because someone finally started doing the math and discovered that they had very likely already run the program out of money.

Last night I saw a news item that says the Administration is going to “wind down” the program. They’re “winding it down” to a stop on Monday. Yes, this Monday, 24 August 2009. As in: you’ve got 4 days to get your clunker turned in.

The Obama administration plans to end the popular $3 billion Cash for Clunkers program on Monday, giving car shoppers a few more days to take advantage of big government incentives.

The Transportation Department said Thursday the government will wind down the program on Monday at 8 p.m. EDT. Car buyers can receive rebates of $3,500 or $4,500 for trading in older vehicles for new, more fuel-efficient models.

Folks, I work with government agencies for a living. A 4-day window isn’t a “wind down,” it’s an emergency shut-off. They’re doing this for the same reason they had to rush another spending bill through Congress. They’re not entirely sure how much money they’ve got left. The article linked says that dealers have already made enough transactions to account for $1.9 billion and will be burned through the $3 billion the program has by early September sometime. That wording gives the impression that the government is shutting off the spigot now so they can run out the rest of the cash in a nice controlled fashion but you have to keep something firmly in mind: after 8 pm eastern time on Monday there won’t be any more transactions accepted. The only money going out after that is to cover sales already completed and, since they’ve had staffing issues delaying the processing of the mounds of paperwork, they don’t really know how much has been spent.

They do know how much has been sent out to the dealers, however. According to the story, it’s $145 million. If we accept the number given for how much has been submitted for ($1.9 B) versus how much has been paid out, that comes to just over 13% of transactions. The program promised to get the dealers reimbursed with 10 days of submission and we know that’s not happening, not even close.

This was a relatively simple program with what amounts to just 1 product to track: cars. The program was understaffed from the start and turned out to be horribly underfunded. I will bet that when the figures are in we’ll find out they need to pony up more money to cover the transactions that were made. Those of us who work with and watch closely the various government programs know that this situation is the rule, not the exception, to government programs. If they can’t do something this basic proficiently, how can they be expected to handle a bigger program with lots more moving parts and a much higher impact on Americans’ lives?

Update: Scott Johnson over at Power Line comments on another sign that the program was badly designed from the word go. A reader over there reported in that government employees, up to and including the lofty GS-15 pay grade, were being offered time-and-a-half to come in over the weekend for the purpose of clearing the backlog of paperwork. Power Line called the DoT to confirm this but didn’t get a response (beyond being told by their DoT contact point that they were, uh, waiting for a response.)

As of this morning, however, the Washington Times is reporting that they got a response to the question of whether the reader report was accurate. That response was: yes.

The U.S. Transportation Department, billions of dollars behind in paying “cash-for-clunkers” rebates, has hired private contractors and solicited volunteers from the Federal Aviation Administration and its own executive ranks to work overtime to clear the backlog.

Employees of the FAA’s air-traffic-control unit were asked to help, but the Transportation Department stressed Friday that essential safety personnel were not diverted from their duties.

Well, I’d certainly hope not. (To be fair, the thought that they would do something like that never crossed my mind until I read that part of the story. I don’t have a whole lot of faith in many government agencies’ common sense but I’ll give them that much benefit of the doubt, no problem.)

Reports are coming in that the web site the submissions are being made to is crashing on a regular basis making the submission process even more onerous than it was originally. The speed of approval will be helped by the extra hands the DoT is throwing at it but everyone needs to recall that these emergency responses to the “all hands on deck” request will be largely unskilled at the task. There’s a spool-up time when any new employee comes on board and some GS-15 manager at the FAA will not have the speed that a regular clerk who has been doing this for a month can demonstrate. The manager will be of some help, yes, but it’s not like they’re bringing on other seasoned clerks.

Dealers in New York and New Mexico are opting out of the program because of
the concern over 1) whether there will be enough money in the program
to cover the transactions and 2) whether the government will actually
approve these transactions. I would hope that there’s some kind of process in place that allows an appeal for disapproved transactions because the incentive to disapprove a given clunker will increase the closer the program gets to being out of cash. It’s going to be an interesting weekend at the car dealerships, that’s for sure.