Friday, July 31, 2009

"Cash for Clunkers" Can Not Benefit the Economy

What's the theory behind "cash for clunkers"? Of course, the same flawed economic logic that is behind every government debacle.

Allegedly, the government will steal $4,500 from taxpayers and give it to a person in exchange for their car, which is a piece of crap or "clunker".

After that transaction, the taxpayers will have $4,500 less to save or spend thus depriving a business somewhere of vitally needed investment capital or depriving another business from obtaining revenue from the purchase that will never take place.

Meanwhile, the person with the clunker will obtain $4,500 which they did not earn in order to buy a new car.

So, in summary, taxpayers who earned the money and businesses that are deprived of productive capital and revenue will transfer wealth to car makers, auto dealers, and the guy with a crappy car.

Can someone please explain how this will benefit the economy?

If it were logically possible for this idea to work - why wouldn't the government simply buy our garbage? Under this program, "Cash for Garbage", before you throw a wrapper or dirty diaper away, you could bring it to the Ministry of Cash, and they would exchange the garbage for cash.

I better be quiet - Obama might be reading...

16 comments:

Realist Theorist said...

There was some talk of destroying the clunkers (to prevent fraud). So, not only are they redistributing wealth from one to another, but they're destroying wealth as part of the deal.

So, it is "Cash for Destruction of Wealth". That's like the killing of pigs and destruction of farm-land in the Great Depression.

All of a sudden, "Cash of Garbage" looks better in comparison :)

Nick said...

It's a very good point you make, but I think the actual motive is to weed out low mpg cars that fuel our dependence on the Arabs, not to stimulate the economy. I do understand where the state might use this plan for other things, devoid of any long term goal, in exchange for votes or propping up small market NFL teams such as the Packers.

Doug Reich said...

Nick,

If the government's goal was really to reduce our dependence on foreign oil, it could liberate the domestic oil industry from crippling regulations that prevent the domestic or offshore exploration of oil and/or assert our right to the land and oil that American corporations developed in the Middle East that is rightfully their's (by contract and by right).

Also, many might be surprised to learn that only about 12-15% of our oil imports come from the middle east. See:

http://tonto.eia.doe.gov/dnav/pet/pet_move_impcus_a2_nus_ep00_im0_mbbl_m.htm


Actually, this program is just a transfer of wealth to car makers justified by the fallacy that this will somehow "stimulate" the economy (it can not) while obtaining some alleged "environmental" benefit.

Of course, the economics do not make sense as I showed, and the environmentalist premise is based on the debunked science of "global warming" (excuse me, climate change), and the contradictory moral premise that nature is an "intrinsic" value which must be protected from man - a theory which I have written about and debunked many times previously.

Harold said...

The foreign oil thing is such a canard. The majority of oil imports aren't even from the Middle East.

Doug Reich said...

update: this is just unreal

http://news.yahoo.com/s/ap/20090731/ap_on_go_co/us_cash_for_clunkers;_ylt=Asij3w4pya.kSydg0EX.eFCs0NUE;_ylu=X3oDMTM2czU0czlhBGFzc2V0A2FwLzIwMDkwNzMxL3VzX2Nhc2hfZm9yX2NsdW5rZXJzBGNwb3MDMQRwb3MDMwRwdANzZWN0aW9uc19jb2tlBHNlYwN5bl90b3Bfc3RvcnkEc2xrA2Z1bGxuYnNwc3Rvcg--

Harold said...

Lol, unreal is us posting the same link at the same time.

It doesn't look like yours are showing all the way though.

Doug Reich said...

Harold,

Great minds...link...alike

The laugh track just exploded

Harold said...

"Harold,

Great minds...link...alike

The laugh track just exploded"


Lol. Why is it the governments responsibility to determine what's an "acceptable" mileage in a car? What does that have to do with the protection of individual rights? If there is a real threat emanating from the Middle East, then the appropriate miliatry actions need to be taken--period.

benjamin gordon said...

I think maybe the Government should give is free food for our poop. They already have a processed cheese program that is hugely successful. They could call it, "Curds for Turds"

C. August said...

I just laughed WAY too much at "curds for turds."

If the Obama administration creates the CFT agency next week, I propose that Benjamin get a nice fat grant from the surplus funds.

Doug Reich said...

The logic of "curds for turds" is identical to the government's logic in "cash for clunkers".

In fact, I think CFT is more logical. The government's redistribution scheme would not be limited by possession of clunkers but available to anyone with a turd. Additionally, they could press the cheese lobby for contributions to pass the bill under the theory of helping the "family farmer".

Win win.

C. August said...

I'm reminded of Monty Python's "Life of Brian," where Brian and his mother are waaaay back in the pack listening to one of Jesus' speeches...

"What did he say?"

"I think he said 'Blessed are the cheese makers."

"That seems odd... just the cheese makers?"

"No, he must have meant all the dairy producers in general..."


That's just from memory, and it's been many years, but you should get the picture. Blessed are the cheese makers, especially the curd makers...

Doug Reich said...

perfect - one of my favorite movies of all time

"I think he's saying we should only wear one shoe"

Michael Smith said...

For a long time I found myself constantly wondering whether Obama is enormously evil or just enormously stupid. It's now clear that he is both.

He has all the devious, duplicitous verbal skills and power-lust of an Ellsworth Toohey PLUS the range-of-the-moment pragmatism of Mr. Thompson, the scared-out-of-his-depth little shyster who was the "Head of the State" at the end of Atlas Shrugged.

This clown and his merry band of fellow cannibal/looters in Congress are determined to destroy the American economy. It only remains to be seen if there is enough left of the American sense of life to prevent it. I'm not hopeful.

Beth said...

Catching up on my reading...
Have you seen this article? "When the Clunker is Greener"
Not only does the C4C program make no economic sense, it isn't even "eco-friendly"!

Doug Reich said...

Beth,

Thanks much for the link!

I had considered that angle while writing the post because, for example, I read that car dealers have to immediately destroy the clunkers in order to get the rebate from the government, i.e., cars that actually function fine were being destroyed meaning brand news cars have to be produced to replace cars that function.

Not only is this economically idiotic, it can't possibly be "eco-friendly" since it is prima facie, a waste of resources. In fact, the whole premise of "stimulus" is to waste money which logically necesiates the waste of resources.

Anyway, thanks again. I am considering a follow up post to integrate this idea that the free market is "eco-friendly" in that profit motivated people use the least amount of stuff whereas the government has to use the most stuff.

Doug