Thursday, September 2, 2010

Broken Windows Will Never Make Us Richer

‘Clunkers,’ a classic government folly - The Boston Globe
Why are used-car prices rocketing? Part of the answer is that demand is up: With unemployment high and the economy uncertain, some car buyers who might otherwise be looking for a new truck or SUV are instead shopping for a used vehicle as a way to save money.

But an even bigger part of the answer is that the supply of used cars is artificially low, because your Uncle Sam decided last year to destroy hundreds of thousands of perfectly good automobiles as part of its hare-brained Car Allowance Rebate System — or, as most of us called it, Cash for Clunkers.
And who is disproportionately affected by the spike in used car prices?
No great insight was needed to realize that Cash for Clunkers would work a hardship on people unable to afford a new car. “All this program did for them,’’ I wrote last August, “was guarantee that used cars will become more expensive. Poorer drivers will be penalized to subsidize new cars for wealthier drivers.’’
I'm often surprised at how the political party that spends the most amount of time telling us how much they want to help the poor, also spend so much time dreaming up and implementing programs that hurt them.

By all accounts the Cash for Clunkers was a dismal failure, but that shouldn't be surprising.  Has there ever been a country that has become richer by purposefully destroying its functioning capital?  I doubt it.

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