Is Cash-for-Clunkers Crackpot Economics?
The government's cash-for-clunkers program to get old gas guzzlers off the road and people back in dealer showrooms buying new -- albeit more fuel efficient -- autos appears to be working. But some critics worry that:
- The $3 billion program is helping just a few people (car buyers and auto dealers) at taxpayer expense.
- Impact on the environment is marginal -- we are still underwriting a new generation of vehicles powered by fossil fuels.
- Sucks away consumer spending from other areas.
"The subsidy won't add to net national wealth, since it merely transfers money to one taxpayer's pocket from someone else's, and merely pays that taxpayer to destroy a perfectly serviceable asset in return for something he might have bought anyway. By this logic, everyone should burn the sofa and dining room set and refurnish the homestead every couple of years."To which I say, what a bunch of grumps. The is a small investment for a large step in the right direction in terms of increasing GDP, easing the strain on the environment, boosting an important sector of the economy and perhaps even putting some people back to work in a decimated industry. Even if it does all those things just a little bit.
Harvard Business Publishing blogger Umair Haque calls this a "bailout with the promise of reform."
"Let me welcome you to 21st Century economics. Today, in the better economy we're building, less carbon emitted does add to national wealth. And that's exactly why Cash for Clunkers matters."Do you think cash for clunkers matters? Is it doing more harm than good?
(Clunkers image by ThreadedThoughts, CC 2.0)