Cash-for-Clunkers: Wrong for so many reasons

Barack Obama learned absolutely nothing from the failed economic policy Soviet Union, because Cash-for-Clunkers clearly demonstrates central planning at its worst.

Cash-for-Clunkers, or as Lenin called it, Наличные-за-старье
Cash-for-Clunkers, or as Lenin called it, Наличные-за-старье

For the moment, let’s just ignore that the Obama brain trust developed a program that was designed to run for three months but ran out of money in four days, and what that might tell us about their ability to forecast anything about the economy or their ability to administer your healthcare.

Seriously. Let’s just put that aside for the moment, because there are lots of other reasons to cringe at Cash-for-Clunkers.

Far as we can tell, Barack Obama learned absolutely nothing from the failed economic policy Soviet Union, because Cash-for-Clunkers clearly demonstrates central planning at its worst.

What the Obama administration saw as a devilishly-clever way to add another $1 billion (now increased to $3 billion) to the automakers bailout will also have the unintended consequence of distorting markets for years to come.

  • By selling cars at artificially-depressed prices, it subsidizes weak dealers who will be able to keep their doors open and compete against stronger dealers.
  • By artificially increasing demand now, it will artificially reduce demand in the future.
  • By artificially reducing the supply of used cars, It will artificially increase the demand for and price of the remaining used cars.
  • By mandating the destruction of used cars, Cash-for-Clunkers will unintentionally distort the market for spare parts and auto repairs.
  • By providing what is, in effect, a $4500 tax cut for those who can afford to purchase a new car during a recession, it punishes those who may need help the most.

Ironic, isn’t it, that the same man who appoints so many czars should make the same mistakes as the Russian communists who replaced the czars.

Source: Examiner.com

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