Thursday, October 29, 2009

Cash for Clunkers


This could be the dumbest economic policy in my lifetime. It might have prompted more sales in the summer of 2009. However, most of these sales were not to people who are buying an "extra" car. It just prompted them to move up their car purchase, or they were going to buy one anyway. Therefore, all of the people who purchased a vehicle likely would have purchased one anyway in the next year or two.

Further, this decreased the number of used cars in the market. That forced the price higher. Many individuals who we would think of as the "working poor" rely on "clunkers" for transportation. Making their life more difficult by raising the price of vehicles isn't good policy, if you care at all about the poor.

Oh, and for this policy, all we had to do was pay $24,000 per "clunker".

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