First - this reminds me of the billions spent to bailout homeowners on the brink of foreclosure. In this case, the auto companies - either bankrupt, owned by the government, or on the brink of collapse - needed a government bailout to boost slumping sales. Remember when Rick Santelli famously ranted: "How many of you people want to pay for your neighbors' mortgage? President Obama, are you listening?!" C4C is the same principle, but we're paying for other people's new ride instead of their house. I'm glad the government has spent a fraction of what it spent on the foreclosure rescue program, but it is the same nonsensical principle. Making auto companies dependent on taxpayer subsidies to sell cars only temporarily and artificially grows their bottom line (with our money), and merely postpones the pains of the recession.Second - this intervention, like every other, will cause distortions in the market. For example, as the picture shows, the clunkers get crushed, removing them from the used car market. This will cause used car prices to rise (lower supply). And instead of crushing the car, could we not at least salvage the good, usable parts? What a waste! Oh I forgot, this is a government program. Also, in order to be a true stimulus, new demand must be created. C4C merely shifts current demand for cheap political points, detracting from next year's sales.
Third - Six of the top ten new cars are made by foreign companies: Honda, Toyota, or Hyundai. That's ok with me, they must be doing something right if consumers choose their products over the alternatives. But of the remaining four, three are made by GM (the other is the Ford Focus), which is now owned by the government. So yes, the government is actually 'stimulating' itself through C4C. How convenient!!
Fourth - If lawmakers wanted to pass C4C to help the poor (not hard to imagine given the popularity of tax hikes on the rich for handouts for the poor and middle class), it isn't really working. The average annual income of those participating in C4C is $57K/yr - only 4K less than the average annual income of new car purchasers.
Last - I can't believe I'm saying this, but John McCain actually had a pretty good point . . . he asked, "why not 'cash for refrigerators?' Or 'cash for lawnmowers?' Or anything else that catches the government's fancy?" C4C is a perfect illustration of what I said in my comment on the last post: "a Governmnet may at pleasure elevate one class and depress another; it may one day legislate exclusively for the farmer, the next for the mechanic, and the thid for the [auto] manufacturer, who all thus becomes the mere puppets of legislative cobbling and tinkering, instead of independent citizens, relying on their own resources for their prosperity." Today is the day of the auto manufacturers, who have certainly become puppets of this legislative tinkering. The benefits of this program are highly concentrated on the few, at the expense of the many. I'd prefer the federal government stop looting us to subsidize the auto companies, amounting to little more than corporate welfare, on our dime. What do you think? Is C4C a good idea, or a very bad use of taxpayer funds?
4 comments:
I can see your point. But let me ask you this, where do we draw the line? If the idea is the government thinks they know how to spend our money better than we do, where do we cut it off? How about the $8,000 tax credit for being a first time home buyer? I know that has been a huge help in stabilizing the housing market. What about pell grants? Medicaid? Public schooling? Isn't it all just the government spending our money? I still don't know when to say one thing is okay and another is not.
Where do we draw the line the other way? It is a slippery slope there too. In reality, this is the eternal debate. When it comes to government taxing, spending, and social engineering, I subscribe to the principle that 'less is more.' Especially when bureaucrats in Washington try to 'fix' the boom and bust cycles inherent in a capitalist, free market economy through shortsighted legislation. All I was trying to say in this post is that I think C4C is very shortsighted and a poor use of tax dollars.
Devin-
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evclem1978@yahoo.com
I agree that cash for clunkers is a poor use of tax funds.
On the issue of line-drawing, the question WHERE to draw the line will always depend on WHO draws the line and HOW they go about it.
The ideal HOW would be to draw the line philosophically, morally, and then to stand back and see where current and future programs fall with reference to the line, rather than looking at the programs, deciding which ones you like or don't (without reference to the philosophical or moral justifications) and then draw the line.
I'm afraid that when this exercise is done backwards, the programs are viewed as good or bad primarily depending on whether the person doing the evaluation feels they personally will receive a net benefit or suffer a net burden.
Another problem with drawing the line has to do with "weaning." Even if you feel that free public education is a bad idea philosophically, it is hard to imagine on a practical level, let alone a political one, how we would transform education from the current system to a market-driven / charitable model.
Finally, there is, in my mind, a huge difference between the line for the federal government and the line for the respective states. In my mind the U.S. Constitution dictates that the line be drawn as restrictively as possible for the federal government, and for each state wherever the majority in that state sees fit (while not violating fundamental individual rights). As things now stand, the federal government has usurped the powers that were reserved to the States and to the People, absorbing so much power that the states' line-drawing is done in a much narrower range than should be the case.
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