Pimp My Ride

By Eric Singer

A few weeks ago, I reviewed the recent "Cash for Clunkers" law passed by Congress. I made the seemingly ridiculous assertion that over the life of the program Congress might bring 15,000,000 cars into the program as we all got hooked on Congressional car incentives. Well it is over a month later, and it's not too early to see if the government is holding the line.

As it turns out, the program was legislated to begin on July 1, 2009, and actually only formally got under way on July 24^th. It took less than a week for the billion dollars to run out, with dealers envisioning commitments for over 200,000 cars. And they want us to believe that having run out of money for this program in one week, they can handle taking over all of healthcare!

Think of this Pimp My Ride program as Viagra for America's waning love affair with the automobile. The Congressional Caucus from Michigan has announced that they will seek to have an additional $2,000,000,000 added to the program covering another 500,000 cars and trucks, which the House has already approved. Almost all trade-ins of older cars can qualify for this program.

Given how little stomach politicians have for depriving constituents of benefits given to others, I now expect this program could ramp up to three million cars a year, or $12,000,000,000 per year, and perhaps cover 40,000,000 cars over the life of the program. If Congress can triple its budget for this program after four weeks in operation, so can I. The expanded budget here would simply follow the normal trajectory of benefits legislation like Social Security and Medicare and Medicaid, as pointed out in an excellent article by Rudy Boschwitz and Tim Penny.

And what is happening to these cars? The dealer has to certify that each car traded in under the program has been disabled. These laws are bad laws. Giving these cars to the poor would be a bad law too, but at least it would expose the naked wealth redistribution at its heart. Destroying the cars outright demonstrates Congressional Wealth Destruction in its purest form: disabling functioning cars that could have fetched a used car price or be given away. It is not even Creative Destruction. It is government mandated Destructive Destruction.

The automotive destruction program is the modern day equivalent of "Breaking Windows" that Frederic Bastiat wrote so eloquently about in 1850. Just because the windows are broken, and people have to be hired to fix them, does not mean we are better off. The unseen loss is the more rational use of capital to build stuff people actually want at a price they would actually pay.

I think that if we are not even going to give these viable cars to our own poor people we should at the very least ship them to Fidel Castro's Cuba, where they have kept alive the traditional American love affair with the automobile. At least there, in Clunker Heaven, they understand what happens when you lose your ability to make things because you were so busy redistributing wealth.