The American Repossessor

Here, we suppose, is a good example of how our Washington lawmakers seem to have such a hard time balancing budgets, controlling spending and making plans for the future that actually have some basis in fiscal reality.

Cash for Clunkers was funded with $1 billion. The best guess in Washington was that the money would hold out until the leaves had all fallen from the trees, football season was in full swing and Thanksgiving was just around the bend.

In fact, clunker pilots burned through that first billion in less than a week, pushing Congress to pony up another $2 billion last week to keep the program afloat. Never let it be said those up on Capitol Hill don’t know which side of the bread holds their butter.

The rapidity with which car-hungry American consumers gobbled up $1 billion in subsidies — which translates to something on the order of $7 billion to $8 billion in new cars — says something about what ails the automobile industry.

We may not be very happy with Detroit’s design shortcomings. We probably are not satisfied that General Motors and Chrysler and Ford are turning out cars that are not as fuel-efficient as they should be. Perhaps we do have questions about the Big Three’s flexibility, worries about its tin ear when it comes to what consumers really want.

But the clunker-inspired feeding frenzy clearly demonstrates, it seems to us, that the reason Americans haven’t been buying cars is simpler than that: They haven’t been buying cars because cars are simply too expensive.

Knock a few thousand subsidized bucks off the top, and dealers can’t keep up with demand, and Washington can’t write checks fast enough.

The price/sales equation has been more clearly, if equally grudgingly, recognized in housing. It has been made explicit because, first, so many people began to default on their home loans. “Bank owned” signs in many well-established Fairfax neighborhoods are a bit more insistent reminder that all is not well, more apparent and in-your-face than a car’s disappearance on the hook of a repo tow. And anyway, repossession isn’t really the problem. Potential buyers just aren’t buying.

Banks got smart as far as housing is concerned, and quit making loans that they knew, or should have known, couldn’t be repaid.

We have wondered for quite some time what recovery in the housing market looks like, and this is it. Driven down by foreclosures, compromised by short sales, diminished by tight credit, houses are selling for something closer to their real value.

And that’s a good thing.

Stagnation in the auto industry will be a much tougher nut to crack. Housing is a neighborhood issue; automobiles are truly international in scope, with parts and raw materials coming from around the globe, often from markets that we can’t control. There are huge labor costs, and crippling legacy expenses that add more than $1,500 to every American-made car and light truck with which a dealer pairs a buyer.

The auto industry is trying to help itself, but as every Ford, GM and Chrysler dealership in Fairfax County can tell you, it’s going to be a tough slog.

Sticker prices must tumble if the auto industry is going to pull out of this skid. That, or salaries, which have been stuck in neutral for more than a decade, will have to climb.

The likelihood of the latter is akin to Washington hitting estimated program costs right on the number.