President Obama has assembled an economic team with tremendous brainpower. These guys are super. Really. So it's pretty amazing to me that the collective wisdom of that team must surely have been ignored when the administration created this little project:
Part 1: "We, the U.S. Government, will purchase your used car for $4,500 if you buy a new vehicle."
Okay, so some might find that part of the plan objectionable--government is not generally in the habit of subsidizing our purchases, and some training in economics will allow you to show that every dollar car buyers receive from the program costs someone else (we don't know who, but why quibble) a bit more than a dollar. But we were in a recession, and car companies were having a hard time, so if government believes that the auto industry is important and needs to weather the storm, I at least understand that. It's the second part of the plan that I find absolutely stunning:
Part 2: "After we purchase your used car, we will destroy that car by pouring molten glass into the motor."
So if the goal of propping up ailing automakers is accomplished by part 1, then why the need for part 2? All the plan does is take a perfectly good car that someone might have gotten a great deal of use from--perhaps someone who couldn't afford a new car even with the subsidy--and destroy it in the name of job creation.
That car simply becomes another broken window. And the lesson for Obama's economic team is that they should try harder to impress upon our policymakers that nobody--not a gang of hooligans, a hurricane, or a government--can create wealth by destroying wealth.
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2 comments:
Of course, part of the selling point was to help the environment by taking vehicles with low mpg ratings (especially 18 and below) off the road.
Here's a great video of Crash for Clunkers, which you may find is a great economic idea:
http://vimeo.com/9920002
True, that was a stated goal of the program. But the average reduction in fleet fuel economy was trivial (largely because improvements were only realized on the cars that were traded in), and was achieved at tremendous cost. Suppose that I trade in my car which gets 23 mpg for one that gets 26 mpg (a greater than 10% improvement). Over the next hundred thousand miles of driving, that improvement would be expected to save about 500 gallons of gas. And that's spaced over about ten years of average driving. I hate to say it, but it's chump change, especially when you account for the resources and energy required to make a new car v. driving the old car and getting slightly worse mileage.
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