Saturday, August 15, 2009

A Clunker Of An Idea

No doubt you are familiar with the old adage that if you provide a man with enough rope,he will eventually hang himself. In that vein, we might also say, "If you give the government enough of your hard-earned money, they will most assuredly misspend it on their way to the poor house."
We need look further than the Cash-For-Clunkers program for evidence of this.
Concocted by the Obama administration, and rubber-stamped by Congress, it operates thusly: the government expropriates one billion-or two or three billion, or however many billion it turns out to be-from the taxpaying public and directs these funds toward a specific industry; in this case, the beleaguered auto industry. Nuts-and-boltswise, each individual is then given $4,500 of this money toward the purchase of a new car, provided the car they are trading in gets less than 18 mpg, and the car they are purchasing gets better than 22 mpg. It's a skosh bit more nuanced than this, but not enough to matter.
The car that was traded in is then physically destroyed.
Sound like a good idea?
No, of course it doesn't.
And here's why:
1) The government doesn't have one billion-or two or three billion, or however many billion it turns out to be. Remember, the government has no money that is not ultimately expropriated from the taxpaying citizen.
2) And even if the government did have the money, they still don't have the money! The government is broke! And if don't believe this, just ask the Chinese.
3) Government programs such as this do not create wealth, but only redistribute it. It directs spending to one sector of the economy at the expense of all other sectors, and savings, and, therefore, investment.
Imagine I rob you, then spend the money on a couple of shirts at the local clothier. Sure I have enriched the clothier, but I have done so at the expense of those who would otherwise have received the funds had I not robbed my victim of, not only his money, but his freedom to spend it as he saw fit; or to save it, presumably in a bank where it would have been invested in the form of a loan.
4) It punishes the poor, as most government programs do. Since the the traded in car must be destroyed, a lower income earner will not have the opportunity to purchase it for his needs at
its lower than new car price.

To sum up: no one benefits.

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