Cash for Clunkers: Yet Another Way Government Increased the Cost of Living



Posted by Ed 4 mths ago
President Obama’s Car Allowance Rebate System (CARS), more popularly known as “Cash for Clunkers,” is now a decade old.

For those with short memories or those utilizing the healthy defense mechanism of repression, CARS, enacted by Congress in the summer of 2009, was a Keynesian-inspired stimulus package consisting of a $3,500 or $4,500 subsidy to those willing to part with their inefficient used vehicles and “trade” them for newly manufactured cars and trucks with better mileage ratings.

Congress initially appropriated $1 billion for what was to be a five month program, both to stimulate new car sales and supposedly improve air quality. Because the initial $1 billion was exhausted in a matter of days, Congress appropriated another $2 billion, the balance of which ran out well short of the five month stimulus period.

Per the legislation, all vehicles traded in were immediately made inoperable and junked, their engines frozen with sodium silica.

Not surprisingly, this interventionist program was a massive policy failure for several very predictable reasons.

First, no economy is made better off by destroying existing resources. Contrary to conventional myth, production of soon-to-be-destroyed-war-goods during World War II did not propel the United States out of the throes of the Great Depression — and neither did euthanizing 690,114 operational vehicles “jump start” the U.S. auto industry in 2009.

Both endeavors merely redirected resources to manufacturing sectors out of touch with genuine consumer demand.

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