Cash for Clunkers was an abysmal failure which distorted the used car market, driving up prices and harming, most of all, poor people.
And the payback isn’t long in coming — today’s used car prices are soaring owing to reduced supply….
See how that works? You can’t get something for nothing. Cash for Clunkers turns out to have been a highly inefficient wealth-transfer program, that is, one that destroyed a bunch of wealth along the way. It gave wealth to those already relatively wealthy people who did the government’s bidding (that is, those who could afford to part with a used car and buy a new one). And now it’s taking wealth from those relatively poor people who need a used car today — in the form of higher prices.
Along the way, it destroyed hundreds of thousands of cars — that’s the real wealth these poor people don’t have access to anymore, because the scrapped cars aren’t a part of the economy.
In Rhode Island, as I posted before, the unintended consequences hurt everyone, not just the poor, because Rhode Island taxes vehicle ownership based on used car prices as of December 31. By artificially inflating the used car market last year, Cash for Clunkers increased everyone’s state taxes in Rhode Island this year. If prices are continuing to rise, as the article indicates, next year will bring an even larger tax bill.
How about a T-Shirt which says: “I didn’t buy a clunker, but I’m paying anyway”?
They never, ever learn. Have we?
Update: Ed Morrissey writes:
In other words, the White House spent $3 billion to make used cars more expensive for working-class families. Nice work.