Cash for Clunkers Revisited


Do you remember Obama’s Car Allowance Rebate System (CARS), aka CASH FOR CLUNKERS? Participants in the program received a $3500-$4500 government cash voucher when they traded in their “gas guzzler” for a more fuel efficient one.

More than 700,000 vehicles were sold as part of the $2.90 billion program. U.S. Transportation Secretary Ray LaHood referred to it as a “wildly successful run.” But in September 2009—the month following the end of the program—U.S. auto sales declined by 23%, led by GM and Chrysler with 45% and 42% drops respectively. Many on the left labeled this program a success because Americans predictably took the free money. It’s no surprise that sales increased as long as they were subsidized with tax dollars, but plummeted when the government cash dried up.

If the sheer idiocy of this program didn’t infuriate you at the time, I urge you to check out the following video: Recall that the program was supposed to get inefficient polluters off the road and “jumpstart the economy.” But what happened to the vehicles that were discarded? In this video (and others) you’ll see OUR federal government using OUR tax dollars to deliberately destroy working vehicles traded in as part of the program.

So how can deliberately destroying productive assets contribute to a vibrant economy? The left tells us that doing so creates jobs required to rebuild or replace them. Henry Hazlitt debunked this folly years ago in a simple example he called the broken window fallacy ( Suffice to say that if the Keynesian left is correct, then Joplin, Missouri is in for an economic boom following yesterday’s massive tornado destruction. Perhaps we should set all of our houses ablaze to revive the construction industry. You don’t need to be an economist to understand how ridiculous this sounds. Unfortunately, many of them don’t get it.

It’s not that complicated. REAL economic activity occurs when value is ADDED to the economy. Spending to REPLACE cars, houses, or anything else that has been destroyed can do nothing to grow the economy over the long term. To the contrary, it actually dampens growth by redirecting resources away from real development projects. Every dollar spent rebuilding what has been lost could have been spent on something else.

It’s mindboggling how so many Americans seem to fall prey to the economic gimmicks of the left.

1 Comment

1 Comment

  1. jeepman  •  May 24, 2011 @7:35 AM

    I’m not a Toyota guy but this is insane. How can anyone think this is good for the country?