Cash for Clunkers ... "Lunatic Economics"

Krauthammer:

Well, it is very popular. It's an artificial stimulus drawing from the future [demand] into the present. I don't think it will have any real effect in the long run other than the temporary stimulus.

But at bottom, it's bizarre economics. We're paying people — what we're forgetting is that all of these cars, tens of thousands of clunkers, are going to be turned into scrap. And the question is why? America is going to be destroying tens of thousands of perfectly usable cars, destroying essentially American assets.

A parody of Keynesian economics is to say that you pay half the population to dig holes and the other half to fill them in. This is worse, because we're paying people with the bribe of cash to destroy huge numbers of assets. Why not put them on tankers, ship them into the third world, and get the cash for cars and parts?

So what you are doing is destroying a whole set of assets and replacing them. That's going to be stimulative for a week or two or three, but in the end, it's lunatic economics.


One Loud Clunk [Kathryn Jean Lopez]
AP:
WASHINGTON — The Obama administration is refusing to release government records on its "cash for clunkers" rebate program that would substantiate — or undercut — claims of its success.

President Barack Obama wants $2 billion more to boost car sales, days after the first $1 billion was made available. Obama has promised greater transparency, but Transportation Department officials say they don't have time to turn over sales data provided by car dealers.

The limited information shows most buyers are not picking Ford, Chrysler or General Motors vehicles, and six of the top 10 vehicles purchased are Honda, Toyota and Hyundai. The Associated Press has sought release of the data since last week. Transportation Secretary Ray LaHood said Sunday the government would release it.


Clunky Clunkers [Kathryn Jean Lopez]
Via Stossel:
Another unintended consequence of the Cash for Clunkers program is that poor people who can’t afford new cars – or expensive used cars — will be crushed along with all those clunkers. If you can only afford $500 - $1,000 for a car, you’ll find many of these vehicles are now unavailable. They have been sent to the junk yard thanks to this program.


Clunker Data [Rich Lowry]
The White House hasn't released the official data yet, but here's a list that Jalopnik published yesterday of the ten most popular traded-in vehicles and purchased vehicles:

The Ten Most Traded-In Vehicles (vehicle's EPA mileage)
1. 1998 Ford Explorer (14-17 mpg)
2. 1997 Ford Explorer (14-18 mpg)
3. 1996 Ford Explorer (14-18 mpg)
4. 1999 Ford Explorer (14-18 mpg)
5. Jeep Grand Cherokee
6. Jeep Cherokee
7. 1995 Ford Explorer (15-18 mpg)
8. 1994 Ford Explorer (15-18 mpg)
9. 1997 Ford Windstar (18 mpg)
10. 1999 Dodge Caravan (16-18 mpg)

The Ten Most Purchased Vehicles (vehicle's EPA mileage)
1. Ford Focus (27-28 mpg)
2. Honda Civic (24-42 mpg)
3. Toyota Corolla (25-30 mpg)
4. Toyota Prius (46 mpg)
5. Ford Escape (20-32 mpg)
6. Toyota Camry (23-34 mpg)
7. Dodge Caliber (22-27 mpg)
8. Hyundai Elantra (26-28 mpg)
9. Honda Fit (29-31 mpg)
10. Chevy Cobalt (25-30 mpg


Gaming the Clunker System

Clunker Cash and Me [Benjamin Zycher]
Let’s face it: After 17 years and 232,522 miles of faithful service, my Jeep’s best days were long past. Time for some new wheels — but money’s a bit tight these days, for me as for so many others.But, as good fortune would have it, not for the federal government: They’re willing to pay me $4,500 — $4,500! — to turn that clunker in for a new car satisfying the combined demands of political correctitude and the auto-dealer lobby. Alas, the rules specify that the big, powerful, safe truck that I want does not qualify.

And so I asked the question on the minds of millions of my fellow concerned citizens: How can I get my snout into this trough? Easy: I buy a small car qualifying for the $4,500, and keep it for a few months until the cash-for-clunkers boondoggle has run its course. At that point, the supply of used cars will have shrunk and their prices driven up; I will sell the almost-new small car for what I paid for it ($12,629 last Saturday) or more, at worst having driven it for free, and then buy the truck I covet.

I am deeply ashamed of myself, having worked the system while the poor get shafted by higher prices for the used cars they demand and by higher prices for the used parts needed to repair them. (Under the rules, the clunker engines have to be destroyed, the real-life Beltway version of the old joke about the fate of dairy farming under socialism: The government takes the milk and shoots the cows.) This is hardly the first time — nor will it be the last — that modern environmentalism has harmed those less fortunate.As for me, I remain ashamed, but not sufficiently so to have forgone the $4,500. And, to be blunt, I am hardly the only sinner in this congregation. When the federal government starts writing checks so as to implement half-baked ideas in pursuit of yet another cause for do-gooderism, gaming the system is the system, an eternal truth relevant to the ongoing debates over health care, taxes, and much else.— Benjamin Zycher is a senior fellow at the Pacific Research Institute.