So now we hear that the auto industry is increasing production to meet the increased demand for cars generated by the Cash for Clunkers program. And this is supposed to be good news; evidence that the program is working.
Not so fast. This program is working, all right, but not in ways its proponents would like for you to believe. On the contrary, the Cash for Clunkers program is a perfect example of the waste and manipulation of most government programs, particularly those that invade what should clearly be a purely private, free-market industry.
Let's make sure, first of all, that we all see the Cash for Clunkers program in the same way:
Step 1. the U.S. private industry and labor force puts in a good day's work to earn income and revenue, Step 2. the government takes a chunk of that income as tax revenues,
Step 3. the government picks a select group of cars that it wants us to buy that we are not now buying
Step 4. the government gives a select group of people a chunk of those tax revenues to apply toward buying those cars if
a. those people are willing to spend whatever is left of their after-tax income on one of these select cars during a specified time period, or
b. those people are willing to go into (further debt) taking out a loan (I thought that high debt levels is part of what caused the recent credit crisis???), and finally,
c. those people can trade in the kinds of cars that the government says we shouldn't have bought in the first place.
What is wrong with this picture? Where do I start! Why don't we skip the obvious, like the enormous wasted resources associated with the development, administration, and implementation of the program. As I write this, car dealers across the country are complaining about not yet receiving the cash promised them by the government, and the Department of Transportation is scrambling to add people to their ranks to deal with the paperwork. Where do these people go when the program is over? Likely, no where. We will be paying their income out of tax dollars collected from the private economy for decades to come.
Car manufacturers are gearing up for increased production to meet the demand. Where are the unsold cars going to go when the program is over? How does it help the economy to produce cars that we don't buy without a payoff from the government? Why not let the auto industry produce cars that you and I want to buy if left to our own devices? And if they can't, they should go out of business and stop wasting our precious resources. Propping up a losing industry just exacerbates the loss to society. If the auto industry was producing what society wanted, it wouldn't be having financial difficulty in the first place. The Cash for Clunkers program does nothing to fix that fundamental problem.
And what about all the other, more obscure side-effects of this program, the unintended, unmeasured, ignored consequences of this program? For one, car repair shops are seeing a marked decline in business. I called my local repair shop for a routine service appointment last week and they told me to come on in! Business was very slow, they said, because several of their customers, rather than pay for a costly repair or service, had chosen to trade the car in for the $4500 in the Cash for Clunkers program. So the car repair industry has suffered a decline in income as a result of this program.
People won't trade in cars that are worth more than the $4500 allowed in the Clunkers program. So,the only cars that would be traded in are those that are worth less than the $4500 trade-in value. By the stroke of a pen, the administration has single-handedly reduced the supply of available used cars and raised the average price of used cars to the U.S. consumer -- not an insignificant cost.
What about all the injuries and deaths that are going to result from accidents suffered in smaller, more fuel-efficient cars? I bought my oldest daughter her first car this year, a hefty, used SUV. Why? Because I wanted to keep her safe. And so far, in this country, that what free people do: we buy the kinds of cars we want. So far. The Cash for Clunkers program moves us ever so slightly away from a free society where we buy the kind of cars we want, toward the kind of society where the government decides what kinds of cars we want, and uses our income to buy them for us. At least the government doesn't make the cars itself ..... oops! Well...on second thought....I guess they essentially do now, don't they!?
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