Kash for Klunkers

Have you heard about this new government program?  Well, essentially, this program is giving automobile buyers an incentive to get rid of their old (and theoretically inefficient) automobiles.  The belief is that we can help the economy and the environment by getting old gas-guzzlers off the streets; while replacing them with nice shiny new American made cars.  Sounds like a great idea, huh?   Yep, its simple.  You just go down to the local car dealer, and they will give you a larger than normal trade-in for your old car.  And, the government will send them a check.  That's right - its free money!  Or, is it free?  Well, my grandfather always told me there was no such thing as a free lunch.  If the government is writing checks to automobile dealers, then, where are they getting the money from?  Well, the only source of income for the government is the taxpayer.  This means that the money is ultimately coming from the taxpayer's pocket. 

So, who is really getting the benefit from this program?  Think about this for a minute.  If you pay taxes, and you did not buy a new car, have you gotten any benefit from this program?  It looks to me like the only two groups, in general, that are benefiting from this  program are the automotive industry and the consumers who are buying the cars.  Isn't this really benefiting the auto unions and the lowest income earners?  Weren't these the two biggest supporters for this administration?  Well, it looks like their support is being rewarded.  It looks like this is yet another "Share the wealth" program.  Am I wrong?  Aren't we creating revenue for the automotive industry by spending tax dollars?  Isn't this a subsidy for lower income Americans, so they are able to buy new cars?  Aren't they going to get more benefit from this program than the middle class folks?  Seems like "Share the Wealth" to me.

I can hear all the counter arguments now.  "The automobile industry is essential to the American economy".  Oh yeah, what about all the other industries?  What about the hundreds of thousands of IT professionals that have lost their jobs because of outsourcing?  I don't see any "Kash for Komputers" programs out there.  Let me be clear, I am not saying that we should do a program for the IT professionals too.  My point is simple: you cannot save every industry.  Natural selection is the nature of capitalism.  If an industry is not keeping up with competition, then, it should become extinct.  The American car industry did not keep up.  Unions have driven the cost of labor to the point of non competition.  I'm not going into the auto industry rant again - see my "Horse & Buggy" post.  Nevertheless, why is the automotive industry is getting all this help?  We know the auto unions have provided an enormous amount of support for this administration?  Doesn't this seem just a bit "fishy" to you?  Sorry ... could not resist the reference!  :-)

Haven't we learned our lesson on subsidies?  Isn't this current economic mess the result of consumers buying things they could not afford?  When is the madness going to stop?

This program seems to be a shining example of the politics of the day.  If the administration was going to do something about the economy, by spending lots of "future tax revenues", I would think they should target a broader base of Americans.  This program (Kash for Klunkers) looks to me like a reward to this administration's supporters.  In general, I am not at all happy that the government is spending money it does not have.  However, if the government wants to spend money to address the economy, then why not put the money towards programs that have a broader impact?  For example, one of the biggest problems we (Americans) are having is unemployment.  And, this administration has been touting the number of uninsured Americans as a justification for their health care reform.  Why not kill two birds with one stone?  Why not provide health insurance to those that have lost their jobs?  If we are going to single out a group of Americans for "government aide", then, we should make sure this decision is not based on politics.  Unemployment is the biggest threat to our future.  The right thing to do, would have been to put government funding into providing unemployment benefits (including health care) for unemployed Americans.