By David Magee
The federal government can certainly sell cars. Its “cash for clunkers” program initiated as part of the recession-based stimulus package has been so well received in the first week that reports suggest a paperwork backlog of 20,000 exists. Under the program, individuals can receive a cash rebate toward a new car purchase when an old car that gets poor gas mileage is traded in.
But one has to wonder how government officials did not anticipate there would be a big consumer demand. Demand is so strong that the program already has used its $1 billion allotment. Many people hoping to cash in on the offer may not get the deal after all.
Yet walking away from the program would make no sense for the government. Common sense says the problem will be solved.
The issue is this: When the government initiates such programs, it has to do a better job of anticipating demand. Otherwise the car buyers and dealers will be left in confusion, as happened in this case.
The Chinese government has had success with similar programs, incentivizing consumers to buy products such as new household appliances, and all reports are that those initiatives have occurred with relative ease. Granted, appliance purchases are simpler than car purchases, but the valuable lesson here is that if you give consumers a great deal, they are going to take it. And the plan for execution according to stronger-than-expected demand needs to be in place.
E-mail David Magee at dmagee@timesfreepress.com
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