Cash for Clunkers

I’m not in the market for a new car this week, but unfortunately my taxes are subsidizing everybody else’s Cash for Clunkers purchases. You’re welcome.

I’m not in the market for a used car, either. Which is fortunate because every car traded in to the Cash for Clunkers program has to be destroyed, regardless of its condition. So the government is in the process of destroying the used car market in order to subsidize the new car market.

By promising up to $4500 in welfare for anybody who trades in their clunker, the government effectively makes the down payment for people. Low-income folks who would normally buy a used car when they need one are being encouraged to buy more car than they can afford. Does this sound familiar? It should. It’s the subprime auto industry.

What happens when people figure out that they can’t make the payment on their government-subsidized Prius? I guess it gets repossessed. Their credit is ruined, their car gets taken away, and there aren’t many cheap used cars left in the market because they’ve all been crushed.

Meanwhile, the resale values of the cars people already own or are making the payments on take a nosedive because of the repossessed cars that will flood the market in six months. Immediate, accelerated destruction of wealth. Yay. Furthermore, auto manufacturers have reduced their output this year. Suddenly you have a few million people with “free” money chasing after a limited number of cars. Inflationary pressure? You betcha!

The evidence points to the idea that people have been putting off their car purchases so that they could participate in this program. Similarly, they’re buying these new cars earlier than they normally would in order to partake in this deal. So we’re compressing the sales for the last four months and the next couple of years into a couple of weeks right now. After the Clunkers program ends, car sales are going to drop back down to their normal market rate, which has been significantly low due to the shitty economy. The net benefit to the economy and the industry is zero, only we’ll have spent a couple billion dollars of money the government didn’t have, and there will be a few million used cars destroyed. Woo!

All this is done in the name of saving the planet from the evil internal combustion engine, right? Reduce, Reuse, Recycle, and all that. Well, the Cash for Clunkers program increases the use of natural resources by subsidizing the energy-intensive process of manufacturing cars. We’re not going to be reusing the cars that were traded in. The government is destroying perfectly good assets that are in working condition in order to force you to buy the cars they’ve decided you need to buy. Yes, the materials will be recycled, but whatever they’re used for in the future will have to be manufactured, which requires more energy, fossil fuels, transportation, yada yada yada. In other words, there’s probably not a big net change in the amount of CO2 produced because of this debacle.

It’s all a waste, unless you happen to need a new car right now. In which case, you’re welcome. Enjoy the new cars I just helped you buy, assholes.