But is this program really such a success? On any number of levels this high level of excitement is really a false sense of accomplishment by the political class, from several perspectives including economic, freedom, environmental and practical:
- How many of these Cash For Clunker sales are truly incremental sales? In other words, how many of these sales would have occurred anyway, one month, two months or six months down the road? I predict that by the end of the year you will see a significant dip in new car order sales since many of these August sales were really just October, November, etc. sales that were pulled forward by the generous rebates. Thus, the political class cannot claim credit for every one of these sales as being incremental.
- There have been reports that some of these sales are not pulling current clunkers off of the road, the program is actually causing some people to go to junk yards, buy barely running junkers for a nominal fee, get them registered and then turning them in for the generous rebates. Thus, in these cases the program is actually putting MORE bad mileage cars on the road, if even for a short time. The one personal case that was related to me was a local car dealer who got a clunker that only had a front window, all of the other windows had been removed or smashed.
- The political class is calling the success of this program a great economic stimulus program which is total nonsense. As calculated in a previous post, if you divide the cost of the program of $3 billion and divide it by the number of US households (130 million), you find that each American household paid $23 into this program. This is money that the average US household cannot now spend on movie tickets, food, iTune songs, medicine, a round of golf, etc. Thus, there is no substantial net increase in economic activity, the program just robbed other consumer categories of sales by forcing us all to pay for this program. Remember the overarching lesson from the book: the government pays for nothing, it only redistributes wealth it takes from its citizens.
- As a continuation of the previous bullet point, this program, like most other government programs, is an infringement on our freedom. We are forced to pay money into this and similar programs via taxes that the political class thinks is a good idea. We should be able to spend our hard earned money on things that WE think are a good idea.
- While I have not investigated the minute details of the program, the fact that some Democrats are grousing about the less than stellar mileage of some of the eligible vehicles tells me that the program is falling short from an environmental perspective also. Since the program is probably not an economic success, you would hope that that least the environment could get a little boost by having only high mileage vehicles available in the program. Apparently this is not the case if even Democrats are balking at this facet of the program.
- And finally, from a socialism point of view, not one of my favorite perspectives this program is also lacking. If you have enough money to buy a new car, even with the $4,500 rebate, you are probably holding down a job or are pretty well off financially. I would expect that not a lot of unemployed, financially strapped citizens are lining up for this program. If the political class is going to take my money, would it have not been a little kinder and smarter to extend some unemployment benefits, beefed up the food stamp program, expanded job retraining programs, etc. and take care of the immediate needs of the unemployed? Given that the program is not a stellar success from economic, marketing, freedom and environmental perspectives, helping out needy folks would have been a much better use of the money.
As always, government interference in the free market place is never a good idea for a whole bunch of reasons.
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