The Client Side - Cash For Clunkers? Seriously? How About Cash For Candidates?

Does anyone really think that Cash for Clunkers is going to help the economy? What a laugh. I happened to be out last week trying to help my mom trade in two cars and buy a better car for her, so I got to see the Cash for Clunkers program first hand and in full swing at as many dealerships as we could handle going to in order to shop her potential trade ins and get a good deal on a new vehicle. No doubt about it, the salespeople at all the dealers we visited were busy because of the program. We saw and talked to a whole bunch of car salesmen that were having a really good week.

So they basically spent a billion dollars on tax payer funded rebates to boost sales for a week and now they may come with another two billion to boost sales for what, another two weeks??? Maybe. Funny thing is, in all that we saw and all the salespeople and dealership owners we talked to, nobody thinks for one second that the dealers are going to hire more salespeople, service people, managers, receptionists or anything else because of this 1 week or potentially 3 week boost in sales. Ask any of them if they think GM, or Toyota, or any of the other Automakers are going to hire more people because of the big influx of sales from this program. Ha! Not a chance. So the Dealers and the Salespeople are going to make a big trip to Walmart this month, or Disney World, or they might pay off a credit card or buy a new lawn tractor. This is going to drive retail sales and economic activity through the roof......for a week....or maybe a month......and then what? The same thing that happens with all these dumb government stimulus programs. Sales in the subsequent months will suffer because you took the supply of buyers out of the market. The guy who traded in his barely moving crap automobile that wouldn't have lasted another few months anyway and bought a new Lexus for $45,500 instead of $50,000 won't be shopping over the next few months for the new vehicle he needed because he already has it. More importantly, nobody will be hired because of this so nobody will have a permanent income boost that can really drive prosperity and drive the economy making things better for all companies involved.

I have a better plan for Congress and our President. Can the Cash for Clunkers thing. You're wasting money. Pump that money into Cash for Candidates. Give the $3 billion (original $1 billion and the additional $2 billion) to companies for immediate Recruiting Fee Rebates. Tell the companies that they can hire whatever employees they need to improve their business and even go hire recruiters to find the best people available to fill those needs. The Gov will give them $25,000 per hire to pass along to the recruiters for the fees. Many of the recruiting fees will be covered completely by the $25,000 but they could hire someone who warrants a $50,000 fee and it would only cost them $25k because the Gov foots the other $25k. For $1 billion, they will get 40,000 rebates, 40,000 new key hires, 40,000 recruiting fees paid. For the whole $3 billion that will add up to 120,000 key hires, 120,000 rebates so the companies will aggressively hire the best people they can as quickly as they can in order to grow their business. Who's going to have a good week or two and go shopping at Walmart or off to Disney World????? Me, and all my TPR friends. We'll handle the 1 week boost to the economy shopping with our little extra income. I know that sounds short lived, but maybe, just maybe, as the companies start growing and pushing forward, they'll come back to us for more key hires to continue growing.

What's better for the economy? Cash for Clunkers or Cash for Candidates? It's not even close.

Todd Kmiec
Todd Kmiec & Associates
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Comment by Maureen Sharib on August 3, 2009 at 8:15am: Wonderful logic. "Common sense" as Rayanne calls it today. Or is that "uncommon" sense? It appears to be.
;)

Comment by Melanie Lloyd on August 3, 2009 at 10:51am: I love it! I wonder if Obama reads this blog?

Comment by Julia Stone on August 3, 2009 at 2:34pm: So, are you saying your candidates are "clunkers"?

Comment by Shari Burke on August 3, 2009 at 3:52pm: Hey! Who ever thought the government made any sense? Also, I don't think Julia ready the part "can the clunkers thing".

Comment by Todd Kmiec on August 3, 2009 at 4:21pm: Yep, the Clunkers are definitely the bonehead politicians, not the candidates. I would never call a candidate a clunker. They're just a fit or not a fit for a given position. Everyone belongs somewhere :)

The post was meant to be pretty lighthearted of course, but I think the big point is that temporary sales of anything will not have a lasting effect on business conditions or the economy. People have to get jobs and companies have to grow which requires them to have more key people who will make higher salaries and of course drive the need for more hires at the lower end. This is necessary for strong business conditions and a prosperous society. The recruiting industry is a huge part of that.

Comment by Ambrish Kochikar on August 3, 2009 at 6:40pm: Interesting post, Todd. Thanks for sharing it. I agree that a temporary boost doesn't have a lasting effect on the overall economy, as the economy is far too complex to be impacted by the sales of a few hundred thousand cars.

The cash for clunkers program got beaten black and blue by critics saying it actually eats up future car sales. The temporary sales of new cars with the help of a rebate (big wad of cash, i agree) does stimulate car sales, but it also means people are making investment decisions they were afraid to make a week or a month or 3 months ago. Some of them will invest cash and others will take out car loans for the balance, probably. The ripple effect will improve conditions for more than just the automobile industry (new cars cost more to insure, for example) .

It would be interesting to learn how many of the buyers in this program were replacing their 'primary' or 'commute' vehicle with a more fuel efficient one, and how many were buying that Lexus they didn't need for another 6 months, just because the rebate was available. Would you?

Drawing a parallel to the job market like you do here, a hiring manager would not hire someone he/she didn't need just because a rebate was available. Even if they didn't have to pay a commission out of pocket, the salary and benefits still need to be budgeted for, just like the balance of the car's price after the rebate needs to be paid for by the buyers.

Comment by Todd Kmiec on August 4, 2009 at 8:07am: Point well taken on the salaries etc...guys. It is clear that the recruiting fees are not what is holding companies back from hiring, it's the larger cost of ongoing salary and benefits and the risk of that cost vs the need for the employee not being favorable. That said, Karen if you think that the cash for clunkers program boosting auto sales for a week or so has had any impact on the steel, aluminum, or auto parts industries then I've got a real nice bridge that I think you may have an interest in purchasing.

Comment by Erica Hood-Vincent on August 26, 2009 at 6:09pm: I love it Todd, lets send it to Congress and lets see what Nancy Pelosi does with it!

Comment by RicardoG on September 8, 2009 at 5:52am: The Internal Revenue Service has announced that the politically motivated Cash for Clunkers program won't get docked on their taxes for participating on the said program since it is a government vouches that is not taxable. The credit you get for trading in your old car doesn't count towards your 1040. Some members of Congress aren't amused – Congressman Ron Paul (R-TX) has advocated a tax deduction instead of a payment – which is a dandy idea. (He also wants to get rid of the IRS, a GREAT idea!) So take heart – you won't need guaranteed loans for your tax bill if you participated in Cash for Clunkers.