Cash for Clunkers

Considering my personal interest in automobiles and the recent headlines, I decided to write a bit today about the "Cash for Clunkers" government program. This program was set up to encourage people to trade in older, less-efficient cars and replace them with new, more efficient cars. This trade was encouraged by making $3,500 or $4,500 government rebates available to automobile dealers. The auto industry has been suffering lately because of the overall economic situation so this program was set up to encourage additional new car demand, which has been sorely lacking in the last several months.

The overall idea of the program sounds nice, but there are several unintended consequences and costs that seem to be ignored or set aside. Some of these are also political considerations, but I will try to present an objective analysis.

1) Should we (as taxpayers) be using $1,000,000,000 (soon to be $3,000,000,000) to subsidize and encourage automobile purchases for a very small subset of our citizenry? Are the resulting economic effects great enough to consider this investment?

2) Should the government decide for us or narrow our choices when it comes to purchasing an automobile? I am a strong believer in efficiency and economy in all areas of our lives, but we sacrifice more and more of our personal liberties as we grant our government control over more and more of our decisions. A market economy, with the painful, yet necessary and beneficial ups and downs will take care of these decisions naturally, but often on a differently timetable than those in government might like.

3) What about the independent auto repair shops that have been servicing these clunkers? These are small businesses in America that also contribute to the economy. Once again, I am a forward thinker that embraces progress, but removing so many older cars so quickly is an abrupt end to a part of many mechanics' livelihood.

4) Should the government play such a role in influencing consumer behavior? Should we encourage people to continue spending when overspending caused many of the problems we're seeing in the economy right now? I know of several people who have sped up or delayed auto purchase decisions because of this program.

5) What is the best future for the U.S. transportation industry? Should the government be making these decisions or should the private industry respond to what consumers want? The government can help to influence some of the decisions of the uneducated masses, but when does this become a threat to our personal liberties?

The recent changes in the U.S. and world economy have brought significant amounts of government involvement in economic decisions. Although some of this has been beneficial, many of these decisions are made more effectively on a local or family level. I am relieved to see some positive signs in the economy of late, but I am also wary of unintended consequences that our "helpful" elected officials might be bringing upon us.