Category Archive 'Cash for Clunkers'

28 Aug 2009

Bastiat Debunked Cash for Clunkers in 1850

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The left commentariat has been burbling happily about the “success” of the democrat Cash for Clunkers program. It turned out Americans with an active interest in a new car, who happened to have an eligible, low value trade-in on hand, were happy to take some free money to do perhaps slightly more rapidly what they were going to do anyway.

Bruce Yandle points out that the relevance of Cash for Clunkers to one of the best known economic fallacies.

University of California-Berkley economist Christopher Knittel has developed a rigorous assessment of the implied cost of carbon emissions under the clunker program. (“The Implied Cost of Carbon Dioxide Under the Cash for Clunkers Program” [pdf], Center for the Study of Energy Markets, Berkeley, The University of California Energy Institute.) Knittel made plausible assumptions about the average life remaining in vehicles removed from the road, the average fuel economy associated with those vehicles, and the resulting levels of carbon emission that would have survived in the absence of clunkers. Eventually, of course, the clunkers would have died a natural but less dramatic death. Knittel then estimated the carbon reduction gained when the large fleet of clunkers was replaced by a new fuel-efficient fleet. When he ran the numbers, Knittel found the cost per ton of carbon reduced could reach $500 under a set of normal values for critical variables. The cost estimate was $237 per ton under best case conditions. And what does this tell us? The much celebrated Waxman-Markey cap-and-trade carbon-emission control legislation estimates the cost of reducing a ton of carbon to be $28 when done across U.S. industries. Yes, we are getting carbon-emission reductions by way of clunker reduction, but we are paying a pretty penny for it.

Frédéric Bastiat’s brilliant parable of the broken window reminds us that a street hoodlum throwing a brick through a window generates a series of job-generating transactions that might raise GDP by a trivial amount, if it could be measured. Indeed, the idea seems so compelling that people today often speak of the silver lining found in the clouds that create hurricanes. Think of the roofers that become employed. But Bastiat’s key lesson is that a window has been destroyed—and it had value. Before touting the total benefits of clunkers, we must take account of the destroyed vehicles and engines that represented part of the wealth of the nation. As Tony Liller, vice president for Goodwill, put it: “They’re crushing these cars, and they’re perfectly good. These are cars the poor need to buy.”

Finally, over the eons, human communities have contrived all kinds of devices to transmit critical survival skills and compatible behavioral norms. One of these has to do with conservation of wealth. “Waste not, want not,” we are told. “A penny saved, is a penny earned,” we are reminded. Using politics to pay people who destroy valuable vehicles, or to hold crops off the market, or to produce ethanol that may use more energy in production than it adds when burned, teaches a lesson of anti-matter and wealth destruction. When all these considerations are made, Cash for Clunkers sounds like a sorry idea that should not be the model for future policy.

Let’s stop Cash for Refrigerators before the idea spreads further.

20 Aug 2009

Man Trades in Maserati Clunker on a Subaru

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1985 Maserati Biturbo

It sounds amazing. In Golden, Colorado, the owner of a 1985 Maserati Biturbo actually traded in his exotic Italian grand touring sedan, with an odometer reading of only 18,480 miles, for $3500 from Barack Obama as down payment on a new Subaru.

The Maserati is doomed. Its engine’s crankcase will be filled with sodium silicate in a government stimulus program resembling those of the Great Depression in which farmers were paid to shoot pigs or plow under wheat, then the whole car will be crushed into a cube of metal.

In this case, maybe Obama should just save a few quarts of good sodium silicate. That Maserati already wouldn’t run.

Weekly Driver:

A man in Colorado was so frustrated with his car breaking down, he decided to capitalize on the “Cash For Clunkers” program. That’s nothing unusual — except his car was a rare Maserati.

The 1985 Maserati BiTurbo has 18,480 miles on the odometer and its interior is nearly new. Yet the owner said he couldn’t drive the car more than 10 minutes without having to call his mechanic.

The Maserati, like all “Cash for Clunker” trade-ins, will soon be crushed. The man said the engine frequently had problems and he’s been trying to the Maserati for months. By trading it in, the owner got $3,500 of government money, roughly the same as he was trying to sell the car for privately.

CNN 1:40 video

That Colorado owner’s experience was apparently pretty typical. The Maserati Biturbo made Time Magazine’s 50 Worst Cars of All Time:

“Biturbo” is, of course, Italian for “expensive junk.” At least, it is now, after Maserati tried to pass off this bitter heartbreak-on-wheels as a proper grand touring sedan. The Biturbo was the product of a desperate, under-funded company circling the drain of bankruptcy, and it shows. Everything that could leak, burn, snap or rupture did so with the regularity of the Anvil Chorus. The collected service advisories would look like the Gutenberg Bible.

Your tax dollars at work. Nobody would buy this dog, but Barack Obama did, using your money to do it.


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