Archive for August, 2009
Problems with Cash for Clunkers Program
The federal government’s Cash for Clunkers program is riddled with potential problems. It is an excellent example of why the Founding Fathers limited the federal government to just a handful of areas of jurisdiction in Article I, Section 8, of the Constitution leaving all other matters to the states and the people as per Amendments 9 and 10 of that document; essentially to protect them from their own ineptitude. Everything that the federal government does has consequences and if all consequences are not understood then it is better that nothing is done.
The program began July 24, with a grant of yet another billion dollars we did not have outside of borrowing and the printing press. It was spent within a week when 85,000 older automobiles were turned in for the $3,500-$4,500 allotted per automobile reducing the averaged priced vehicle from $26,000 to potentially $21,500. Now another two billion has been approved. The money provided simply increased the national debt by a few billions. China will have no problem adding this to the 10% they already own of the national debt and our grandchildren, yet unborn, will be paying interest on this loan long after the new car is dismantled.
It is true that with this program the automobile industry was stimulated and people are buying new cars once again. But is it sustainable and will it not artificially drive prices upward? Would not these same buyers purchase anyway a few months down the road? Most purchasers had good credit or bought with cash and most were the upper class. Most were trading in their 2nd or 3rd older vehicles. Others without the cash or good credit may have, in effect, been lured to buy beyond their means as happened in the housing fiasco. Living beyond ones means is seldom good.
