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WSJ: Cash for Clunkers "One of Washington's all-time dumb ideas"

Regular readers of this blog have been well-versed in the numerous failures of the Cash for Clunkers program. But the Wall Street Journal went straight for the government jugular with this searing op-ed piece:

Cash for clunkers had two objectives: help the environment by increasing fuel efficiency, and boost car sales to help Detroit and the economy. It achieved neither. According to Hudson Institute economist Irwin Stelzer, at best "the reduction in gasoline consumption will cut our oil consumption by 0.2 percent per year, or less than a single day's gasoline use." Burton Abrams and George Parsons of the University of Delaware added up the total benefits from reduced gas consumption, environmental improvements and the benefit to car buyers and companies, minus the overall cost of cash for clunkers, and found a net cost of roughly $2,000 per vehicle. Rather than stimulating the economy, the program made the nation as a whole $1.4 billion poorer.

The basic fallacy of cash for clunkers is that you can somehow create wealth by destroying existing assets that are still productive, in this case cars that still work. Under the program, auto dealers were required to destroy the car engines of trade-ins with a sodium silicate solution, then smash them and send them to the junk yard. As the journalist Henry Hazlitt wrote in his classic, "Economics in One Lesson," you can't raise living standards by breaking windows so some people can get jobs repairing them.

In the category of all-time dumb ideas, cash for clunkers rivals the New Deal brainstorm to slaughter pigs to raise pork prices. The people who really belong in the junk yard are the wizards in Washington who peddled this economic malarkey.

Ouch.

Interestingly though, new car sales for Ford only dropped 5% (from 2008 sales figures) during the month of September, the first post-Cash for Clunkers sales period. Yet measured against last year's sales, Chrysler was off 42%, and GM was off 45% in September. Why such a lop-sided differential in sales between the "Big 3" auto makers?

The state-run news media seems to be deliberately avoiding a direct discussion of the biggest difference between Ford, Chrysler, and GM -- Ford was not bailed out by the Federal government; consequently, Ford is not being managed by White House "czars" and the UAW.

In the midst of a steep recession, Americans have clearly voted with their dollars. Despite the wishful thinking of liberals both in the press and in the White House, it seems clear that a majority of Americans are not excited about the Federal government, already a lumbering behemoth with the power to suffocate anything it suddenly disfavors, getting into the car business. Our politicians would do well to remember this the next time talk of "bailouts" begins swirling around Washington DC.


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Comments (23)

Politicans remember nothing... (Below threshold)
Not Always Right:

Politicans remember nothing, learn nothing and for damn sure do nothing of any benefit to the nation so it is not likely they will learn any sort of lesson from the failure of the Cash for Clunkers program.

Well obviously, according t... (Below threshold)
GarandFan:

Well obviously, according to the theory of Obamanommics, it's time for "Cash for Clunkers II". Barry will give us a second chance 'to get it right'. After all, HE is never wrong. Just look at all the jobs "saved" by the "Stimulus".

Makes sense to me. Next I ... (Below threshold)
jim m:

Makes sense to me. Next I think we should give them permanent management of 16th of the economy and power to dictate who lives and who does not (health care).

What could go wrong?

that was 1/6th of the econo... (Below threshold)
jim m:

that was 1/6th of the economy.

WSJ: Cash For Clunkers "One... (Below threshold)
914:

WSJ: Cash For Clunkers "One Of Washington's all- time dumb ideas"

Not! Well, maybe one of.

Sucking up to a community organizer was dumber still.

The decadence of the Americ... (Below threshold)
kathie:

The decadence of the American government, sanctioning the destruction of a perfectly drivable car so they can give you $4000 to buy a new one. A car....it is just such a sick idea.

The Wall Street Journal is ... (Below threshold)
Victory is Ours:

The Wall Street Journal is owned by the same mega-corporation that owns Fox News - aka News Corp. They are bankrolling Sarah Palin, from what I've heard.

The fact that they now sound like Fox News and actually parrot Fox News is news?

Not to people who are informed and aware.

Guess that leaves out a lot of people, huh?

Vic

And Your point is what VICX... (Below threshold)
914:

And Your point is what VICX?

You suddenly see the twisted money grubbin fools that were right before you all the time??

lol

Haha, just as I finished re... (Below threshold)
Oyster:

Haha, just as I finished reading Vic's post my husband came down the hall and asked, "Who's a tool?"

Guess I must have said it out loud.

Bankrolling Sarah Palin, so... (Below threshold)
bobdog:

Bankrolling Sarah Palin, so you've heard? Where did you hear that, Vic? Olberman? Huffington? The American Communist Party website?

You really should be kinder to Sarah Palin. She may be your next president in 2012.

I got a great idea. Let's ... (Below threshold)
engineer:

I got a great idea. Let's all go to Vic's house and trash it. Make it all the liberal houses. Break the windows, yank the wiring out of the walls and punch holes in the walls. What fun and we're helping them and
America get wealthy!

Jim M -We could on... (Below threshold)
JLawson:

Jim M -

We could only be so lucky that they'd try to grab 1/16th of the economy instead of a sixth...

Hmm. Maybe if we pay 'em off with a fifth they'll leave us alone?

The big problem I see is that the majority of folks in Congress are lawyers. By training and preference, their concentration is on language and influencing the listener to persuade them their point of view is the correct one.

They're not concerned with the actual effects or results of their ideas. It's all a game to them, and they're concerned with 'winning' the right to implement what they think is a good plan - and the actual results of their 'win' is nothing that concerns them. Practicality and results take a far second place to their ideology and the racking up of political points for future use.

'Cash for Clunkers', a limited program of small import, didn't work as expected. Why is it assumed that the same people who brought us that can actually take over a much, MUCH more complex portion of the economy and have better results?

re: "Why is it assumed that... (Below threshold)
Hank:

re: "Why is it assumed that the same people who brought us that [cash for clunkers] can actually take over a much, MUCH more complex portion of the economy and have better results?
"

I'm reminded of the definition of insanity.

I'm reminded of the defi... (Below threshold)
jim m:

I'm reminded of the definition of insanity.

If all you ever do is vote for a Republican or Democrat...

Looks like it's time to cre... (Below threshold)
OLDPUPPYMAX:

Looks like it's time to create a special new tax for anyone daring to buy a Ford rather than something made by our dear leader!

You know, some days I think... (Below threshold)
Meiji_man:

You know, some days I think some of the lefty posters on this site are just sock puppets from the management keeping us entertained with something to chew on.

I have driven and liked Gra... (Below threshold)
Grace:

I have driven and liked Grand Caravans and currently own one. I would be in the market for a trade in/up sometime this spring.

I do not trust GM any more. I love my dealership, service dept., etc. but will be looking for a different brand even if I need to pay more for my vehicle.

I refuse to support this fiasco of government ownership of private companies and I will take my dollars elsewhere.

This will hurt my dealership and I am sorry for that because they are not to blame, but i just cannot prop up the government motors.

If you thought CFC was a du... (Below threshold)
hermie:

If you thought CFC was a dumb idea, wait another couple of months for the figures regarding repossessions of cars bought during the CFC program from people who couldn't afford them to begin with.

So the opinion was a bit bi... (Below threshold)
JustRuss:

So the opinion was a bit biased, but the facts are 100% accurate. Even the much vaunted CBO agrees with that Vic. You can spray paint crap green and call it environmentally friendly money but it is still crap.

hey can anybody remeber the... (Below threshold)
Flu-Bird:

hey can anybody remeber the SUSUAN B. ANTHONY dollars or how about when the FDA replaced the skull and crossbones POISON SYMBOL with that silly MR YUK symbol WHO IS NOT USING THEIR BRAINS IN THE NATIONS CAPITAL BESIDES THE LIBERALS?

vic - "The Wall Street ... (Below threshold)
Marc:

vic - "The Wall Street Journal is owned by the same mega-corporation that owns Fox News - aka News Corp. They are bankrolling Sarah Palin, from what I've heard."

Hurray. vic passed Shoot the Messenger 101 with a 4.0 grade average.

I also notice it's been just short of 5 hours since dropping that turd of wisdom.

Classic troll activity.

Question vic, is Edmunds owned by NewsCorp?

"The Inconvenient Truth About "Cash for Clunkers" Is $20K Per Sale In Taxpayer Cash"

Hmmm. I guess since the WSJ... (Below threshold)
Kyle:

Hmmm. I guess since the WSJ was acquired, it must have just suddenly changed its editorial policy from liberal to conservative...in order to match FoxNews' reporting? I don't think so. I think most WSJ readers are fiscal conservatives...which is why they read a newspaper that has editorials with a fiscal conservative approach. (Same reason liberals love reading the NYTimes...people like to read what they like to read.)

Kyle


The Wall Street Journal is owned by the same mega-corporation that owns Fox News - aka News Corp. They are bankrolling Sarah Palin, from what I've heard.

The fact that they now sound like Fox News and actually parrot Fox News is news?

Not to people who are informed and aware.

Guess that leaves out a lot of people, huh?

Vic

FYI, while Ford was support... (Below threshold)
Jake:

FYI, while Ford was supporting the bailout efforts on behalf of the industry, before the bailout came up, they were healthy enough to have not needed much, if anything in bailout funds.

The point that Ford is suffering less than others because they didn't receive bailout funds isn't accurate. Pre-bailout they were doing better than the other two of the Big 3.

Sorry, your cause and effect assumptions here are wrong.




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