Debt and Clunker Economics
George Will devotes his column in today's Washington Post to America’s “clunker economy.” Paraphrasing Winston Churchill famous statement thanking British pilots during World War II, Will says:
“Looking ahead with trepidation, Americans are thinking: Never have so many of us owed so much.”
He then ticks through a number of statistics about the state of the economy as well as the failed $862 billion 'porkulus,' and then describes the liberal view of economics this way:
“Sin is understood by liberals as government austerity, which is understood as existing levels of government spending, whatever they are, whenever.”
The best part of Will’s column, however, is devoted to used cars. He explains the administration’s failed Cash for Clunkers program this way:
“The used-car market is an important mechanism for redistributing wealth to low-income persons: The price of a car drops when it is driven out of the dealership, but much of its transportation value remains when it enters the used-car market. Unfortunately for low-income people, the average price of a three-year-old automobile has increased more than 10 percent since last summer. This is largely because the Car Allowance Rebate System, aka "Cash for Clunkers," which ended in August 2009, cut the supply of used cars.
“Cash for Clunkers provided up to $4,500 to persons who traded in a car in order to purchase a new car with better gas mileage, but it stipulated that the used car had to be scrapped. The Boston Globe's Jeff Jacoby reports that a study by Edmunds.com shows that all but 125,000 of the 700,000 cars sold during the clunkers program would have been bought even if no subsidy had been available. If this is so, each incremental sale cost taxpayers $24,000.”
Extending what Will asked at one point: Does any of this increase anyone’s confidence in the administration’s economic and tax plans? The column is an insightful, yet entertaining, read.