Goodbye to "Cash for Clunkers" and Good Riddance

Thanks for the invite to write for Atlanta Politics Online. I'm one of the editors of the One Conservative Voice blog, which focuses on national issues. I work as an actuary and would generally be considered to belong to the Austrian school of economic thought. On that note, I'd like to write what I hope is an obituary for the soon-to-be departed "Cash for Clunkers" program that ends tonight.

That so many of our elected leaders of both parties think that this program will actually provide stimulus goes a long way to explaining why our country has gotten as messed up as it has. I'll briefly discuss just a few of the things that are broken about this program, starting with the most obvious arguments and working my way to more involved defects which are cited less often if at all.

• It's nothing but a transfer of wealth from the US taxpayer to those who manufacture and sell cars.
• It doesn't actually stimulate anything because all it's doing is pulling sales from the past (i.e., those who were planning to buy a car anyway just waited until the program kicked in) and the future (i.e., those who would have bought a car next month or next year just accelerated their purchase).
• It does for the car market what CRA and the American Dream Downpayment Assistance Act of 2003 did for the housing market. Folks who until now did not have a car payment are being encouraged to buy more car than they can afford. I predict that the car repo business will be a good place to be employed in the next 6-12 months.
• It doesn't even succeed in its stated policy of reducing carbon emissions. While lower MPG cars are being replaced with higher MPG cars, the new cars are probably going to be driven more miles - particularly in the midst of summer vacation season - eliminating any predicted benefit.
• It is driving up (no pun intended) the prices of used cars by taking thousands of used cars off the road.
• Perhaps most damning (but least mentioned) of all is that it makes us all as a society poorer. Folks who focus on the price tag miss the basic point that economics is simply the science of allocating limited resources in the most efficient way; money is just a way "to keep score" for lack of a better term. The simple economic reality, looking beyond the dollars, is that productive real assets are being destroyed. It's no different than if we demolished houses to keep home prices up or killed cows to keep beef prices up. It's the same absurd policies that were followed during the Great Depression, and ultimately they will make us ALL much poorer, by a lot more than the $3 billion official cost.

So, good riddance to this program! We can all sleep better tonight knowing that in the morning the federal government will not have this particular tool available for destroying our freedom and weakening our economy. And thankfully Congress is in recess, so they aren't yet working on developing their next misguided program.

OK, that's all I have for right now. I look forward to hearing from readers; any suggestions for topics are most welcome. What would you like to see here, and what format would you like my posts to take?