Posted by Rob Minton
Follow me on Twitter
Just yesterday, I read a newspaper story about how the government's "Clash for Clunkers" program was a big hit with auto dealers and consumers.
And why wouldn't it be? Part of the government's stimulus package, it gave rebates up to $4,500 for trading in gas guzzlers for more fuel-efficient models. Good for consumers, who got even more attractive deals on cars, and good for the auto industry, which is struggling. On top of it, better fuel economy is good for the environment and might make us less dependent on oil.
Of course, the program now appears to be over. Just a week after it started. When it was one of the few stimulus items that was evidently effective.
The program is apparently being suspended over concern that funding is already running out. So many consumers have taken advantage of the offer that there is a backlog of transactions the government hasn't processed yet, and the $1 billion for the program might not be enough to cover what has already been promised. It appears the program was TOO successful for the government to handle all the transactions.
Now, I don't want to make any political statements, so don't take this the wrong way, but this is kind of typical of a government enterprise. They get an idea, they implement it, but then the execution gets kind of messed up. No matter what your opinion is of the whole stimulus idea, you should be able to see that something that appeared to be working has now gone awry.
The same thing happened with the loan modification program that was supposed to slow down foreclosures. The program was in place, the money was available, but banks didn't seem to all understand the requirements and there was a backlog of applications -- similar to the CARS situation -- big enough that, for a while, nobody could really put together enough data to tell whether the program was working.
From an article earlier this week from the Sun Times News Group:
A Government Accountability Office report released last week, for example, found “The lack of adequate documentation and specification of the assumptions makes it difficult to assess the reliability of Treasury’s estimates and, going forward, may hinder efforts to evaluate how well the program is meeting its objectives.”
There are two main lessons we can find these two programs' stumblings:
1. No matter how good a plan you have, how much money you have committed to it, or how fast you implement it, you have to have a system to execute it. It's true if you're running a business, or a government or your investments.
2. You have to track your results. The loan modification program for mortgages is a mess right now in part because there are hints that it isn't working, but not enough hard data to determine whether that's the case. So money is being spent continously on something that may or may not work. That's called "guessing." Systems are betting than guessing.
Often business, or investing or whatever, is about trial-and-error. That's fine, but without systems to execute or systems to track results, you can end up not having enough money committed to something that works and have a ton of money committed to something you are not sure of whether it works.
And that's where we are today.
Comments