Cash for clunkers…the final chapter
The verdict is finally in on the “cash for clunkers” program, and I doubt that any rational person will applaud.
I know you will find this hard to believe, but, it appears that new car sales weren’t “stimulated” at all, they were just moved from one time period to another.
Last week U.S. automakers reported that new car sales for September, the first month since the clunker program expired, sank by 25% from a year earlier. Sales at GM and Chrysler fell by 45% and 42%, respectively. Ford was down about 5%.
Now, there’s a surprise.
But, the news gets even better, assuming that’s possible.
Rather than stimulating the economy, the program made the nation as a whole $1.4 billion poorer.
How could that be, you ask? Well, we took thousands of old cars that were traded in under the program and destroyed them…no used cars to sell to people who couldn’t afford new cars, no spare parts to sell to people who couldn’t afford new parts, and no sales of used cars to many other poorer nations that eagerly buy our used cars. That dumb piece of the program destroyed capital (i.e. used cars) and, as a result, as a nation, we are $1.4 billion poorer now than we were before this misguided legislation. Taking that further though, I wonder how many jobs were lost in those industries as well?
But, some will say, hey, look at all the gas we will save by having more fuel efficient cars on the road. Certainly that will redeem the program, won’t it? Well, no it won’t.
According to Hudson Institute economist Irwin Stelzer, at best ‘the reduction in gasoline consumption will cut our oil consumption by 0.2 percent per year, or less than a single day’s gasoline use.’
So, summing up, cash for clunkers didn’t increase auto sales, destroyed $1.4 billion in capital, put people out of work, reduced our gasoline consumption only by an amount equivalent to one day’s use per year, and it only cost us $3 billion to accomplish that feat. Pretty neat, huh?
And now, they want to run our health care. Think of how much havoc the government can wreak with a $1trillion program.
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