Note to business students: if you have just spent $50 billion to acquire GM and Chrysler, do not pay people $4,500 to buy a Honda.
The government’s Cash-For-Clunkers program is out of money; it only took one week to burn through $1 billion, and now they need $4 billion more. That must be some kind of new record for government mismanagement.
This was the flagship program of Obamanomics - government/industry partnership, environmentally correct, economic stimulus, putting people back to work, hope, change, blah, blah, blah. It didn’t last a week - and the bleeding has just begun.
Auto dealers have spent millions promoting a defunct program that has now been suspended. Clunkers taken in on trade must be recovered from scrap yards because new rules require disabling them on-site. State regulations will restrict this, so the lawyers can’t be far behind. Every day, new conflicting rules come out, and more paperwork is required, adding cost after cost after cost onto the dealerships.
A classic case of good intentions meeting bad incentives. People who took advantage of the rebate were, for the most part, going to buy another car this year anyway. We just robbed $4,500 from Peter to pay 20% of Paul’s new car. Worse yet, Peter hasn’t been born yet, we just added the bill to his crushing debt burden.
The way the rules were written, the worst polluting cars did not qualify for the rebate. They are still out there spewing smoke and guzzling gas. For many classes of vehicles, the change in fuel efficiency gained from the $4,500 could be as little as 2 mpg. You can improve your fuel efficiency more than this by driving differently – you should ask for $5,000. Cash-For-Clunkers was basically welfare for Sandalistas who wanted a new Prius but couldn't afford it on ACORN pay. Good riddance.
What is the lesson to be learned here? The same one we have to re-learn over and over again: the government is really bad a doing just about anything.
Before we give government control of health care, we should remember Cash-For-Clunkers, as well as Katrina, Sub-prime loans, TARP, Superfund, and a thousand other debacles that did more harm than good and cost multiples more than we were told they would. If the government can’t run a used car lot, we probably shouldn’t let them try their luck at brain surgery.
In Article I, Section 8, the Constitution assigns 18 specific powers to the federal Government. These are necessary and appropriate – roads, copyrights, currency, defense, interstate commerce, naturalization, post office, courts and the like. The 10th amendment prohibits the government from exercising any other powers. Let’s face it: those guys were smarter than us. We still don’t get it.
In the enumerated powers listed in Section 8, there is no mention of buying cars, paying mortgages, running banks, buying auto companies, selling energy, running schools, or providing health care. Or about a thousand other things our government does badly on a daily basis.
Final note to business students: if you want to own a used car lot, do not hire Congress to run it for you. Get a used car salesman – they are more trustworthy.
Tim Nerenz is the Libertarian Party Candidate for U.S. House of Representatives from Wisconsin's 2nd District. To support Dr. Tim's campaign, please visit the campaign website at www.timnerenz.com.