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.
But the biggest problem is what it did to the other end of the automotive industry. The used car businesses and the repair shops who find employment selling or fixing the older automobiles and those manufacturing and distributing older parts now have less work and are now hurting because of the additional bailout given by the government to the big auto companies on the other end. And what of the middle class and the poor who will never have a new car and depend upon the availability of the older cars such as college students? What of them? Automobiles transcend from the rich to the poor until some one finally drags it to the auto wrecking yard; each step benefiting a portion of the population. Now the shortage created by governmental short sightedness will drive up the cost of the fewer older cars.
Even those required to crush the still good cars are expressing reservations about the program. They are observing that the cars they crush are often in good condition, clean and useable. Some say that the cars they are forced to destroy are better than the ones they themselves drive.
Pouring liquid glass into the motor and then running it until it seizes up making certain that that engine is never used again is unconscionable waste reminiscent of the government programs of the Great Depression. Then freshly planted fields were plowed up and baby chicks and pigs were slaughtered all while hunger stalked the land. Will we never learn?
But back to my main point, which is government involvement without a through understanding of all affected (which is nearly impossible unless you are God) benefits but a few and is almost always detrimental to the rest. The Founders understood this and made a short list of things that the federal government could be involved in. Everything else was considered unconstitutional. The Cash for Clunkers program is a million miles outside that list. (See supporting videos to this article below.)
httpv://www.youtube.com/watch?v=5upNq0FGe_A
httpv://www.youtube.com/watch?v=lZBeTZhzUpI
httpv://www.youtube.com/watch?v=h5eRbw93h8A
httpv://www.youtube.com/watch?v=0h9EgIFyN7o