Tuesday, August 04, 2009

Cash for Bonkers   [John Hood]

A thought just occurred to me as I read some of the news coverage of Democratic proposals to perpetuate the “Cash for Clunkers” stupidity.

Back in the first term of the Roosevelt administration, its agricultural policies created the absurdity of the federal government paying farmers to destroy their crops even as many Americans were finding it difficult to feed their families. The program was intended to prop up prices and thus benefit farm interests at the expense of consumers — the former being well-represented in Washington, the latter not so much. If you think about the economy in Keynesian terms, such a policy might appear rational. If you think about the economy in practical terms, of course, the policy was idiotic.

There’s something similar going on with Cash for Clunkers. Automobiles represent a significant share of the nation’s capital stock. Even used cars often have years of life left in them, years during which owners can use them to get to work, perform work, or transport themselves and their families for education, recreation, or consumption.

“Clunkers” don’t play much of a role in the lives of upper- and middle-income Americans, I suppose, but they play a major role in the auto market for low-income Americans. What the federal government is now doing is using taxpayer dollars to subsidize the large-scale destruction of functional cars that would otherwise exchange hands one or more times in the used car market. This will make it harder for poor folks to purchase cars in the future. It’s an income transfer up the income distribution, at the behest of so-called progressives.

Back in the 1930s, the story goes that President Roosevelt was accused of being “dumber than a jackass” because the Feds were paying farmers to tear up their fields and some of their plow animals resisted it, having been trained over many years, sometimes by whip, not to destroy plants. Today, I guess one could say that President Obama cares less about the poor than a used-car salesman does.

08/04 11:16 AMShare