Two years late, $3 billion short

8 11 2011

This just in: Cash for Clunkers may not have been an efficient use of tax dollars or an effective attempt at stimulus.

Though the futility of the 2009 automobile exchange program was apparent from the start to members of the right-minded alternative media, it’s taken mainstream journalists a bit longer to catch on. Hence this piece, which recently appeared in the Washington Post Blog.

While the $3 billion program was undeniably popular, I suspect that even those who traded in their older vehicles for a $3,500 voucher for a newer, more fuel efficient ride at least implicitly understood it as a cash grab rather than a real attempt at stimulus – especially since, as the WaPo piece states, at least “45 percent of cash-for-clunker vouchers went to consumers who would have bought new cars anyway.”

For publicity-driven politicos, a quick but artificial spike in auto sales was great news, even if it couldn’t last. Sure enough, like an alcoholic coming off a bender, vehicle sales crashed after the program expired. This chart (found at HotAir) says it all:

Correlation doesn't always equal causation, but sometimes...

Of course, there’s a Keynesian escape hatch built into the the failure of every stimulus program – one that I’m surprised was missing from the WaPo article. It’s a cop-out as old as the hills (or at least the New Deal), and it’s been applied by the likes of economist Paul Krugman to our current crisis: the argument that programs like Cash for Clunkers could have worked, if only they were bigger.

Yet Cash for Clunkers was such a blatant demonstration of wasteful Keynesianism put into action – with useful (if a bit older) cars actually destroyed in a fruitless effort to create wealth – that not even the mainstream media will openly sing of its supposed merits. And that’s progress.

Despite all this, the WaPo piece still manages to work in some pro-stimulus cheer leading. The author, fighting valiantly against whatever nascent glimmers of rationality shone through earlier in the piece, claims that “handing $3,500 vouchers to people who would’ve bought cars anyway still counts as stimulus.” And stimulus, even when it’s a lousy deal, is still good. Lord Keynes told him so.

What a day it will be when the media decides to question the effectiveness of stimulus proposals before they lead to the waste of billions of taxpayer dollars. Until then, expect more boondoggles in the spirit of Cash for Clunkers, and take solace in the fact that you are, intellectually speaking, leagues ahead of our politicians and the chattering class that supports their programs.

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