Saturday, August 1, 2009

Cash for Clunkers

The Associated Press reports that
The government's popular "cash for clunkers" program may be running out of money after only a matter of days as car shoppers flock to dealerships to take advantage of the rebates.
Known as the Car Allowance Rebate System, or CARS, it was originally funded at $1 billion and scheduled to run until November 1, or until the money ran out. The money ran out in days, as CARS has subsidized the purchase of 22,782 vehicles, with another 25,000 deals in the pipeline waiting government approval. Dealers are worried the government won't come through with the money.
Lawmakers said they would try to find additional funding for the program, which under the legislation could grow to $4 billion for the funding of up to 1 million new car sales.
Wouldn't it be wonderful to help consumers take up to "1 million gas guzzlers off the road," as the CARS bill's author, Rep. Edward Markey, D-Mass., said recently?

The answer is no -- not if your goal is to correct the mistakes that brought on the recession. As Peter Schiff observes:
By incentivizing Americans to destroy fully paid-for cars so they can go deeper into debt buying brand new ones, the government weakens an already crippled economy. The last thing we want to do is subsidize Americans to go deeper into debt by buying more stuff. Don’t they realize that is precisely the behavior that got us into this mess?
The additional debt will help short-term GDP numbers, but at the price of long-term misery. The rampant stimulus policy of the Obama/Bernanke administration "will prove lethal to any recovery," Schiff concludes. "The recession is over; long live the depression!"

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