If you’ve been following the news at all, you have probably heard your fair share of Obama PropagandaRama. One such item on the ObamAgenda is the Cash for Clunkers scheme, where the government puts up the funds for a $4500 credit toward the purchase of a new car if someone brings in a “clunker” to the dealership. The objective, so the Obamanauts say, is to put more fuel efficient cars on the road AND save the auto industry in America.
Bollocks. What a massive load of bollocks. If you think that paying someone to destroy wealth is beneficial to anyone except the payee (and anyone else sitting on the gravy train along the way), you need to seriously reevaluate whether you should be forming opinions on economic issues at all.
Of course it’s going to stimulate auto sales (though not always American auto sales, so even that part of the mercantilist argument is shot). It’ll even raise the fraction of cars with over 30 MPG on the road. But that’s hardly a step forward for everyone, especially because everyone minus the auto salesmen and rebate-cashers are going to have to pay for this insanity.
The reasoning for this one is easy. There is an economic value in getting from point A to point B. For example, without this ability, some people would not be able to get to their jobs where they produce valuable goods and services. The cost of a car is part of the cost of assuring the ability to get from point A to point B. “Clunker” or not, the proposition for most people is a net benefit, whether they drive a 2009 Toyota Prius or a 1995 Jeep Cherokee. And the proof of this is that a 1995 Jeep Cherokee still has a market value (somewhere in the ballpark of $1500-$3500). While that’s only a small fraction of the value of the vehicle when it was driven off the lot, it’s still significant value that’s being destroyed when you aggregate it into thousands of trade-ins that are getting destroyed as a result of this program.
Imagine a program that paid people to not work for the last 10% of their working lifetimes. Not only would they not be working and producing, but others who are working and producing will have to pay for that program. The net impact is a double-loss of value – first, of the value of the goods and services that would have been initially produced by the program’s beneficiaries, and second, the value that is typically lost via wealth transfer due to resource mis-allocation. Think Napoleon paying people to dig ditches and fill them again (broken window fallacy). And, of course, nevermind the moral questionability of such a policy.
But the environmental impact, you say? It is indeed true that since there will be fewer clunker automobiles on the road that there will be fewer sources of emissions on the road. But that’s a far cry from saying that our overall environmental impact will be lower. Obvious fact: to create and transport new energy efficient cars, energy is required, from pulling the metals out of the ground, to refining them, to assembling them, to shipping them off to the lot. Even if the policy still results in a net reduction in “environmental impact,” it won’t even be anything close to what the policy-peddlers claim it will be. And, of course, reduction in environmental impact isn’t an end in itself; if that were the case, then eradicating humankind would be the best policy. So the question that has to be asked is: are we paying an acceptable price for the net reduction we might get in an environmental impact? Of course not. Any policy that requires advanced management or planning is something the government will invariably bungle.
A "bungle" is possible, of course, only if you assume that the people who turn the gears in the government really have reduction in environmental impact in mind. Considering that bills like these function as A) transfers of wealth from one group (taxpayers) to another (the auto industry) and B) make-work to make it look like the administration is solving problems, there seems to be a bit more to it than the altruistic preservation of nature. At a price tag of $1 billion for the first wave, it shies in comparison to the spending that will result from Obamacare and the many other policies that are currently being rammed up our collective asses. It does, however, buy a disproportionate share of media time.
Also, take note that the Obama administration is refusing to release data regarding where the rebates went. Why would they want to, anyway? It’ll just give everyone some data to analyze and calculate the net effect of the policy which is, naturally, a huge waste of money. What would we do without the government?
My advice to individuals: as usual, take advantage of this program if the opportunity comes your way. After all, it’s you and your children and your children’s children’s taxes that are going to have to pay for this kind of absurd theft, and you might as well get some of it back. Hell, a $4500 credit would more than wipe out my individual tax contribution for 2008. It’s a start.