Tuesday, August 25, 2009

Clunker Mania and its Aftermath

Stubbornness sometimes pays off. For years I had resisted getting rid of our 1992 Chrysler Town & Country minivan. It served as our (and occasionally our friends') spare car, and my father's car whenever my parents came visiting. It was also good for hauling five plus passengers or bulky home supplies when needed.

Then this Cash for Clunkers (CARS) program was launched last month. Anita and I happily traded in our minivan for a fuel efficient SUV, getting a $4,500 rebate from Uncle Sam in the process.

Nationally in the US, this $3 billion taxpayer funded program has benefited automakers, dealers and about 700,000 buyers like us. The implementation by the government could have been a lot better, especially in avoiding internet outages and speed of processing claims. But overall this was a huge success and has boosted the recession-hit auto industry. This clunker mania also drew in many shoppers to dealerships who did not qualify for rebates, but were enticed to buy cars anyway.

What now? Consider three factors. First, some pundits have predicted that with the ending of this program the sales of autos will slump. Second, a lot of owners of old sedans are feeling left out. That's because only the old cars and light trucks with a rated gas consumption of 18 mpg or less qualified for the rebate, and this excluded most sedans. Third, some eligible clunker owners couldn't buy a new car because of shortages of popular fuel efficient models due to the enthusiastic response to the program.

The following steps by the Obama administration and Congress can address all these issues:

  • A new version of the program raises the mileage ceiling for clunkers so it includes many more sedans. Say, the EPA mileage ceiling for clunkers can be raised from 18 mpg to 21 mpg. This will create a second wave of new car buyers, as well as help those who were eligible but couldn't complete their transactions under the just ended program.
  • At the same time the rebate per vehicle can be slightly reduced so that the same public funds cover more cars. For example, the rebate can be $3,000 for the new car's fuel economy improvement of 6 mpg or more (4 mpg for new SUVs), and $2,000 for 4 - 6 mpg (2 - 4 mpg for new SUVs.)
  • The implementation should be considerably improved this time around. With even halfway decent capacity planning there was no reason to have website crashes or overloads. Just 700,000 claims with each file of a few MBs size were being uploaded over a period of several weeks. Any decent data vendor could have made many times such capacity available even at short notice. The same applies to human claims processors using back of the envelope calculations, especially now, with the benefit of hindsight.

Another aspect bothers me, though I've no solid solution. Some experts have decried the requirement that the engines of the old traded vehicles be disabled to take them permanently off the road. This in a macro sense is a destruction of value since some of these vehicles may have many years of useful life left. It is worse if the vehicle in question now happens to be a car with somewhat better fuel efficiency than the existing 18 mpg threshold.

Can we spare such cars, and only require them to be converted so they can use compressed natural gas (CNG) that is much cheaper and less polluting than gasoline? This conversion is very popular in India and costs $1,500 - $2,000. Can such converted used cars be allowed to be exported to countries like India, so that the US owner bringing them in gets a much higher trade in value, in addition to the government rebate? That can draw more owners of less old cars to avail of the CARS program and buy new vehicles. But I haven't thought this through and it needs more study.

Monday, August 17, 2009

Another Look At Howard Dean

I was underwhelmed by Howard Dean's Democratic Presidential bid in 2004. Even before the Iowa primary and his much publicised "scream" (a total non-factor for me) Dean was my fourth preference, behind Wesley Clark, John Edwards and John Kerry, in that order.

I had paid inadequate attention to what Dean had to say and thought he leaned too far left on some issues at that time. But as 2008 rolled along I was impressed by his articulation of Democratic values and even-keeled stance as DNC chairman during the Hillary - Obama primary slug fest. And now he's been making direct, succinct and insightful comments in TV news shows on health reforms, including on the issue of the public option that he strongly supports.

In the Morning Joe program on MSNBC he offered this very interesting perspective on death panels and why Obama seemed to be backing away from the public option ahead of a Senate vote. He said this was a way to get a bill past the Senate with 60 votes when Democrat senators like Ben Nelson and Kent Conrad are sabotaging the public option provision. This provision can then be re-introduced through a "reconciliation process" with the House of Representatives bill that then needs only 50 votes to pass. If that's truly what Obama has in mind then I won't be so hasty in judging him.

Others have also noticed how Dean is such an effective voice for health reforms and for batting down misinformation by opponents. Here is a YouTube clip by a group called The Young Turks showing how Dean counters three arguments against key reform provisions. The commentator wonders why Dean isn't the Health and Human Services Secretary. Now that he's done being DNC chairman I hope he gets to assume another high public office. And yes, if I could revisit 2004 he'd be my top choice among those presidential candidates.

Monday, August 10, 2009

Is Some Profiling Okay?

I think much better of President Obama now though I'm not always his fan. I voted for him last November thanks in large part to the person to whom he owes a huge debt of gratitude. I'm referring of course to Sarah Palin. Her post-election antics and recent comments (e.g., "Obama death panels could decide if her parents and her baby, Trig, who has Down’s Syndrome, will live or die") confirm that voters like me chose well.

Following the Henry Gates arrest in his own home I had the same initial reaction about probably stupid police behavior as Obama articulated to his cost. So I sympathize with him and his need amidst the media circus to make amends through a beer fest. The Cambridge police union had a nerve asking for Obama's apology. How does a uniformed law and order force get to have a union anyway? In India such a practice is rightly banned. It is interesting to see the racial divide on who people think was at fault.

My views on this incident and the larger issue of profiling are unlikely to please either camp.

First, I think the policeman James Crowley acted improperly in arresting Gates and was much more at fault. When Gates said he lived in the house Crowley clearly should have realized how an African-American Gates would be upset about his perceived profiling by the police. Gates probably assumed that cops happening to pass by had stopped to challenge him simply because they saw a black man getting into this upscale house. All Crowley had to do was to civilly inform Gates that the police had received a 911 call about a possible break-in so they needed to verify identity. Instead, Crowley mechanically repeated orders in this just-do-as-I-say-since-I'm-a-cop manner that inflamed Gates who was probably unaware of why the police were there. Too bad Crowley's misconduct was rewarded with beer in the White House, though I completely understand Obama's recognizing political realities and defusing an unexpected firestorm.

At the same time I think that some forms of ethnic profiling can be reasonable, useful and appropriate if done right. At our University of Chicago campus which is surrounded by some rough neighborhoods, in almost all muggings, break-ins and other crimes the perpetrators were black. So our campus police on patrol would frequently watch for black youths without book bags to enquire as to where they were heading to ensure they were on bona fide business. Were they wrong to do so? The chance of the accosted youth being up to no good was very low, say, 1 in 200. But for non-blacks that probability would be more like 1 in 20,000. So what's a more efficient use of limited resources? The only thing is, the university police went out of their way to be polite, pleasant and apologetic once the subject of their attention was confirmed to be okay.

Take also the case of South Asians and Middle-Easterners, including myself, after the 9/11 attacks. I know many of my fellow-Indians and especially Muslims were livid when they were pulled aside for detailed searches at airports. I had much more than my fair share of such searches, but I thought differently. How can I blame the poor security personnel? From my looks I could easily be a Middle-Easterner, and even Anita says I can have an intimidating gaze. So even if the absolute probability is minuscule, I'm a 100 or 1000 times more likely to be a fanatical hijacker than your average homegrown American traveler.

During and after my full searches at airports I'd put screeners at ease and thank them for keeping us safe, and mostly got a lot of gratitude and goodwill in return. Some screeners would then confess to being stressed by the indignant reaction of many passengers pulled out for this special treatment. Subsequently, to achieve balance and perhaps political correctness I'd see random passengers including teenage girls being identified for additional searches. There's some merit to this approach, but using it to supplant (rather than supplement) the traditional way including profiling is likely to make us more vulnerable.