And for an Encore, Let's Condemn Office Buildings and Rebuild Them Nearby

Wed, 05 Aug 2009 16:00:58 +0000

By my reading, Stan did not disagree with anything I posted about Cash for Clunkers. None of the three criticisms of the C4C program that he addressed were leveled by me. My criticism is that it is a waste of assets, and that a waste of assets necessarily makes us poorer. But it is worth revisiting the each of these popular criticisms in turn, to figure out which of them have merit:

1) C4C isn’t going to increase total sales of new cars; it’s just going to accelerate buying that would have occurred anyway.

I agree with Stan and his sample of 2. It is possible that some people who did not previously believe that they would be better off by paying their own money for a new car will now use the rebate to make themselves better off. But this is in no way a selling point for the program. We have destroyed otherwise productive assets (the clunkers). Nothing about the flow of money associated with that destruction undoes the destruction. That the rebates are so high that Stan's friends are now making a whimsical purchase just further illustrates the idiocy of the program as a use for government funds.

2) Environmentally speaking, it costs more to make the new car than the savings that will be realized from driving it.

This may not literally be true, as Stan indicates. But neither is it true that the environmental gain from the C4C program is as high as the simple calculation of (Improvement in fuel economy with the new car) x (Miles driven with the old car). The more fuel efficient car is cheaper to fill up, so miles driven will go up. That additional fuel consumption due to the additional miles has to be netted out. The environmental cost of scrapping the old car also must be considered.

And I think with the first statement in his reply to this criticism, Stan may be trying to have it both ways. Will the program boost auto production or won't it? Stan indicates that, because the cars being sold have already been produced, there is no new environmental damage that is done from producing them. That's true for those particular cars. But there will be environmental damage done in producing whatever cars are sent to dealerships to replace them. To the extent that the program succeeds in its efforts to boost auto production, even if that boost is not one-for-one with the number of cars sold as part of the program, then there are environmental consequences that have to be considered. Either those costs have to be acknowledged, or the proponents of the program would have to acknowledge that it will have no impact on auto production. I don't think they want to pick the latter, even if it were true.

3) There’s no evidence we really need an additional $2 billion.

Given that the program is a waste of resources, there cannot be evidence that we need to triple the amount of resources we are wasting. If there were evidence of anything, it would be simply that if reasonable health insurance cost $4,000 per person per year, then every billion dollars flushed away on this program is another 250,000 people for whom the government couldn't fund a health insurance purchase this year. The people who think that the government has very important demands on its funds should be the most outraged by this.