More Cash for Clunker Doubts

More information on the ills of the government’s “Cash for Clunkers” gimmick.

William Jeanes, the AOL Autos columnist, notes a few things:

• A new survey of those who purchased vehicles under Cash for Clunkers noted that 17 percent of those buyers experienced some or serious doubts about the purchase – that’s more than twice the typical “doubt” rate.

• “Three revealing line items in a separate CNW survey noted that the drain on the family coffers would be offset by reducing the pay-down of credit card debt, deferring home improvement and removing money from non-targeted savings. About one-fifth of buyers surveyed cited each of these categories as the number one source of their car payment bucks.”

• And for good measure, there will be no fuel savings from the shift from clunkers to new, more fuel efficient cars. Why? Jeanes cites research noting that these cars will be driven more often and farther distances. He notes: “The approximately 700,000 total vehicles moved under the program will therefore use an additional 42 million gallons of fuel annually during the first years of ownership.”

• Oh yes, and there’s the following little matter: “Other critics groused that Cars for Clunkers took $2.8 billion from the general roster of 300 million citizens and handed it tax-free to a small group of 700,000 citizens.”

Don’t you just love government?

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Taxpayer Cash for Economic Destruction

The government’s “Cash for Clunkers” program was bad economics on so many levels.

I wrote a column on the issue, and National Review has an editorial. Let’s focus on a particularly egregious aspect of a plan only politicians could think up – namely, that economic destruction could be good for the economy.

In my column, I noted:

Fourth, there is the incredible waste of government deciding to destroy vehicles that still operate. Only politicians and their appointees could truly believe that destroying productive assets is good for the economy. As historian Burt Folsom has pointed out, it’s similar to the federal government’s subsidizing farmers, and then in 1948, “the overproduction was so dramatic that the bureaucrats in the Department of Agriculture ordered surplus potatoes destroyed via public burnings.”

And National Review observed:

When we talk about government policies destroying wealth, we usually mean taxes that shift money from efficient to inefficient uses. Rarely do we mean the deliberate destruction of valuable assets. Yet, thanks to the Cash for Clunkers program, which ground to a halt yesterday, we now have a visual aid to help with this abstract concept. Mechanics tasked with destroying the so-called clunkers have been posting the videos on YouTube, often muttering in anger as they fill the engines of perfectly good Corvettes and Cadillacs with sodium silicate and then run them until they self-destruct. The goal of the Cash for Clunkers policy is, literally, the destruction of wealth.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council