A Cash for Clunkers Postmortem

Irwin Stelzer at the Washington Examiner with a calm and measured explanation of why cash for clunkers wasn't a good idea no matter how much money it gave away and funnelled to the new, All-American auto industry. (He's a lot calmer about this mega-economically ignorant example of the "broken window" fallacy in action than I am.)

Highlights:

Government forecasters are really bad at their job. The program was originally funded with $1 billion of taxpayer money to cover rebates of $3,500-$4,500 on cars traded in for more fuel-efficient models, and the money was expected to last for about six months. It lasted for one week…..No surprise, then, that the government just discovered that its forecast of the deficit in the coming decade is light by a mere $2 trillion, or almost 30%.

…the government's talents, whatever they might be, do not include efficient administration of its programs……The Department of Transportation assigned 2,000 workers to process dealer paperwork, but they seemed unable to get the money to dealers who, having laid it out in response to promises of prompt repayment, desperately needed the cash. So if you think the President's plan to "reform" health care will make it easier to cope with the paperwork surrounding hospital and doctor's bills, think again.

….programs such as Cash-for-Clunkers have no regard for lower-income consumers. By mandating the destruction of trade-ins, Congress removed 700,000 cars from the used-car market, inevitably driving up prices of the cars that lower-income consumers tend to buy.

And by ordering that a trade-in's engine be destroyed by replacing its engine oil with a sodium silicate solution (which turns out to be in short supply!), Congress sharply reduced the salvageable used parts that are bought mostly by poorer consumers to keep their cars running.

Reason Online has poured silicate in the engine of this dumb plan plenty of times in the past month or so–check out these links, one and/or all.