Not surprisingly, Obama, the Democrats in Congress, and the complacent Republicans in Congress recently voted to extend and appropriate additional funds to Cash for Clunkers. The program is just another endless example of a temporary, short-term government solution to a problem that could be solved by the free market.
The late economist Milton Friedman, whose wife Rose sadly passed away earlier this week, used to say that “nothing is so permanent as a temporary government program.” Generally this is true, but — despite the fact that Congress authorized an additional $2 billion in emergency funding for the bill two weeks ago — there are reports that the Cash for Clunkers program may already be out of cash yet again.
No problem, since the government has an unlimited source of revenue: namely, We the People. Another Friedman quote may be better fitting for this particular case: “If you put the federal government in charge of the Sahara Desert, in five years there would be a shortage of sand.”
Okay, so the Cash for Clunkers program is immensely popular — so why the criticism?
The program, administered by the the National Highway Traffic Safety Administration (you trust them, don’t you?), was created to help boost the auto industry while helping the environment.
Sounds good, right? Consumers who own a car with low fuel efficiency can receive $3,500 to $4,500 from the federal government if they buy a new car with higher fuel efficiency.
Harvard economist Jeffrey Miron explains several problems with the program, namely: 1) the program pays people to junk cars that still have economic value; 2) the program will cause an increase in driving; 3) Official government policy favors one industry (automobiles, in this case) at the expense of other industries. Miron concludes that Congress “should end the program, not expand it”.
Of course, the government solution does not come without inefficiencies. This article points out that many car dealerships are considering pulling out of the program because they are not receiving payments from the government. Many of the dealerships understandably need that money to pay their bills and meet their payroll. Surprise, surprise — the government is not responding to local car dealerships who are participating in its own program.
Finally, there is today’s headline in The Milwaukee Journal-Sentinel: “Charities worry that car donations will go clunk” — which is very concerning. Talk about a good way to stifle the market — let’s just put charities out of business altogether and have the government save us all.
The article highlights how very worthwhile endeavors such as Kidney Cars Program and the Rawhide Boys Ranch are now competing with the government. These private charities — along with scores of others — both use donated vehicles to raise funds for their programs.
This underscores Professor Miron’s point about the negative impact of the government coming to the rescue of one industry and impacting it to the detriment of other industries.
A program like Cash for Clunkers is simply not an appropriate role for a constitutionally limited government to administer in a free society.
Cash for Clunkers is a temporary solution that will soon go broke.
We’ll just have to wait and see how long it takes for the politicians to — once again — rescue the overzealous program with the hard-earned dollars of cash-strapped American taxpayers.
On August 20th, 2009 at 3:37 pm
Car donation charities are happy cash for clunkers is ending as it is hurting them badly.
On August 21st, 2009 at 12:28 pm
Good…, as they say, all good things come to an end. Actually, this could be considered a BAD thing b/c it’s CRAZY, we are giving people money to live more vicariously and lavishly than before all this economical bust took place? What are we doing? Spoiling every single last American? Let’s learn to live in moderation, then we wouldn’t have so much debt…Well, the fish sticks from the head..so the head is the While House…right?