The following letter appeared in the Wednesday, August 26, 2009 edition of The Nashville (IL) News.
While enthusiastically received, the government's Cash for Clunkers program is but a band-aid that offers no long-term solutions.
We have been told that since so many people have lined up to exchange their "clunkers" for a rebate to buy a newer, fuel-efficient car, the economy is turning a corner because people are spending again. But it seems like no one is asking where the money for these rebates is coming from. The government is in spiraling debt, but taxes haven't increased nor have any programs been scaled back, so we know that the governent hasn't raised any new revenue.
Where did this money come from? It had to either be borrowed or printed out of thin air. In either scenario, we are all further in debt or face inflation. What this means is that at a time when people should be saving their money, the government is encouraging people to accrue more debt.
We are not far removed from the housing crisis that resulted in millions of people facing foreclosure and repossession. The money supply was expanded to accommodate all the loans issued that ultimately could not be paid back. Even with generous rebates, we will ultimately face inflation, and poorer folks are destined to default on car payments. And even though people flocked to car dealers for a couple of weeks, factories are not re-opening, closed dealerships remain closed, and workers are still laid off.
Like a shot of morphine, Cash for Clunkers makes us feel good about the economy for a little while, but eventually the high goes away and we return to reality. And that reality is that Cash for Clunkers was a $3 billion program that brought no new jobs to a struggling economy and deepened the debt.