Friday, August 28, 2009

Cash for Clunkers Flunks Out

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.

Happy driving.

Carl Wicklander


Left Coast Rebel said...

Great to see you published Carl. Of course your common-sense points here were at one point in our history, just that - common-sense. Our populace has shoved aside notions of fiscal literacy, in no small part from the inept public education system as well.

The Cash for Clunkers program is extremely instructive because it points to the myriad flaws inherant in any and every big-government program. You cannot tax and spend and create prosperity.

Imagine when these same jokers have their hands on the entire US health care system. It doesn't take a genius to know where that will end, just common-sense.

The Law said...

I agree 100% C4C was a program made for the wrong issue... I saw it as a 2 billiob dollar advertisement for green cars and lessening foreign oil dependence. If they were going to spend that kind of money, at least give it the right name tag, instead of using a super sale to justify why a failing economy will see better days.

Carl Wicklander said...

Thanks, LCR. It doesn't take a genius to figure out this is a road to more debt. My feeling is that people want to believe these sort of schemes work regardless of what common sense tells them. My fear is that there is a lot of dreaming going on.

Carl Wicklander said...

The Law,

I agree with you about getting less dependent on foreign oil but something like Cash for Clunkers strikes me as more of a bribe than having anything to do for the environment. Plus, not everybody's getting their bribe, so it's looking more like a disaster than anything else.

TRUTH 101 said...

Carl: with George Will finally coming to his senses about Afghanistan, do you think other conservatives will follow suit? Could a return to true conservatism mean good things for Ron and Rand Paul?

Carl Wicklander said...


It's great news whenever someone turns against war and destruction, but I'm afraid it doesn't mean a whole lot for conservatives of my bent. Bush's wars are still the issue that most unites the mainstream Right, not health care or opposition to anything Obama does, but the wars.

George Will made reasonable cases for leaving Iraq and Afghanistan. He'd been leaning in that direction for awhile so it wasn't a huge surprise to me. The way he's been demonized by every war racketeer is also unsurprising. He's calling into question the issue that's kept the Republican coalition together.

People are indeed listening to Ron and Rand Paul more now and that's good news. But what they mostly want to hear is what they say about economics and spending, not foreign policy. You can still hear people call Ron Paul a kook and a crank these days, but you can bet it's his foreign policy views that they're thinking about. The GOP isn't ready to shed its War Party status, at least on a bigger scale.

I've been listening to every Rand Paul speech that I can access and I've been hard-pressed to find instances where he'll even mention foreign policy. I don't take that to mean that he's secretly a mini-McCain, but that he understands the state he lives in. The voters of Kentucky might send him to Washington because he's a strict fiscal conservative who just happens to be antiwar. They would not send a Republican to the U.S. Senate whose main issue is bringing the troops home who happens to say the right things about economics. But if he wins the Senate seat because he's got sound economics and as a result brings foreign policy sense to the Senate, then that's good news.