Tuesday, August 11, 2009

Driving Poor Americans Out of the Car Market

Gary North's article on the Federal "Cash For Clunkers" program reveals its genuine purpose: to drive up the price of cars by reducing the supply. Traded-in old cars have their engines destroyed, rendering the vehicles useless for anything but scrap. Poor people will be the first casualties of this boondoggle due to a decreasing availability of used cars (the kind they can afford to buy), and to a government-created shortage of spare parts that they've been able to buy cheaply from pick-and-pull yards. Beneficiaries will be the banks (people usually take out loans to buy new cars), the largely moribund domestic auto industry (which wants to unload inventory), and the scrap metal industry.

CFC is a current version of an old "New Deal" horror: the government's destruction of livestock and other agricultural products to keep food prices high during the Great Depression.

North observes that Congress, in approving measures like this, has lost touch with reality:

There is no boondoggle too nutty for Congress to reject our of hand. The fiscal deficit is an estimated $1.8 trillion. Instead of watching every spending bill like hawks, Congress figures "What's another $2 billion?" The magnitude of the deficits today is so great that there is now no resistance to further spending, all funded by government debt.

This is hit and run of the poor. It is also hit-and-run either for future taxpayers or future investors in Federal debt, who will be stiffed by mass inflation. Then the rest of us will lose.

There is no stopping Congress today. The last flickering traces of fiscal sanity ended in the election of 2004.

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