Cash for Clunkers; Trouble for Taxpayers by Capitalist Hero

The "Cash for Clunkers" program is symbolic of everything that is wrong with our political leadership.  It clearly illustrates that the Obama administration and Congress are incompetent when it comes to matters of the economy.  It is hard not to feel bad for Obama.  Every decision is the wrong one.  Every proposal, a  misstep. It is painfully obvious that Obama does not understand the policy that his Keynesian high priests have set forth; and his childlike explanations makes teleprompter recitations seem so difficult that by the end of the press conference, you wish someone would just let the man rest. 

The stated purpose of the Cash for Clunkers program is to stimulate new car purchases and promote eco-friendly cars, but really it is just a wage subsidy for autoworkers.  That's not too say others wont also benefit.  Dealerships, Auto stockholders, car salesman, new car purchasers etc. will make off with some scraps.  So what's the big deal, Capitalist Hero?  It's just a few billion dollars.  I guess it's the pervasive myth that the destruction of capital leads to prosperity that really irritates me. 

One of the criteria to obtain the "cash" requires the dealer to destroy "clunker's" engine and drivetrain components, despite the "clunker" being an income producing asset.  If it wasn't an asset, then the owner would have scrapped it long ago.  Maybe the clunker schleps your gardening tools to your different job sites.  Maybe is transports you to Wal-Mart where you earn a wage.  Or maybe, you use it to help your friend move to a new place.  Whatever function it performs; its function provides value to the economy.  If it didn't have value, then the owner would have already scrapped it.      The idea that the destruction of capital leads to prosperity because it generates economic activity when you replace the destroyed capital is empirically false.  The "clunker" that is destroyed cannot be sold to a poor family.  The poor family might have been able to afford a $1000 clunker but certainly cannot afford a new car.   Also, the economic resources (labor, energy, metal, etc) is diverted from efficient endeavors to this government subsidized project. 

The premise that "Cash for Clunkers" is pro-environment is equally absurd.  The idea is that I trade in my old SUV with a combined 18 MPG to an SUV with 22 combined MPG.  This increased fuel efficiency is supposed to lead to oil independence and reduced CO₂ emissions.  Of course when you consider all the energy that is required to destroy the clunker and all of the energy to make the new vehicle (including the energy to transport the workers to the factory, heat the factory, run the factory, mine the raw materials, convert the raw materials into finished parts, etc.) the net effect is more oil dependency and more CO₂ emissions. 

The "Cash for Clunkers" subsidy fails at both of its stated goals.  It harms the environment because the energy needed to destroy the clunker and produce the new vehicle is greater than the energy saved on the increased fuel efficiency of the new vehicle.  It wont increase auto purchases as buyers are simply moving purchases, they would have made anyway, forward; and it will dimmish future demand as future buyers wait for the next gimmick.

My problem with "Cash for Clunkers" is that it is patently unfair.  It is just another wealth transfer.  So now I'm expected to subsidize my asshole neighbor's purchase of an H3 Hummer, while his H2 hummer (purchased with a HELIOC which is now in default) is destroyed by the dealer.     Nice country...

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