Cash for Clunkers Silliness

Professor William Luckey explains here the sheer nonsense behind the Obama Administration's ill-conceived and now defunct "Cash for Clunkers" program. Will they ever learn?

Now, let me get this straight, and maybe put it in more truthful terms. If you were driving a real clunker, could it be that you could not afford a new car to begin with? Now you are to bring the ol’ jalopy in, and for $4500 in cash, go into debt for a new car costing, say, $25,000? While it is true that a clunker would not bring in much exchange value, so that this program would up the return, would you bring in your old car in for $4500 if you were not already going to sell it and buy a new one anyway? Just take my own experience. I drive a 2000 Buick. I bought it used, and it is a great car. I have no intention to sell it, but even IF I wanted to trade it in for a new one, and IF I could have gotten $4500 dollars for it, I still could not afford a new car. Would the promise of $4500 make me go into debt to buy a car I could not afford to make the payments on? Absolutely not. Forget the fact that I am a trained economist. My dog would not do that either.

Take another aspect. In my experience, real clunkers are driven by poorer people anyway. They can’t afford a new car either—hence they drive the clunker until it can drive no more. What do they do then? Buy another clunker from the used car market.