I think the Cash for Clunkers program is
misguided. Yes, it will stimulate the economy insofar as it encourages
people to buy cars and keep the auto industry rolling. I don’t think
this is the best thing for society as a whole, though.
Given that the current financial crisis was caused by people getting
over their heads in debt, having a program that encourages people to buy
more and get into more debt seems like a bad idea. People who would
have made do are now getting new cars in order to make use of this
great offer. Government largesse, however, does not cover the full
cost of the vehicles, so many folks are quite likely spending more
money than they otherwise would have.
By effectively lowering the retail price of the vehicles, the
government is also distoring the true social costs of car
ownership. If anything, car prices don’t reflect all the externalities
of their manufacture and disposal. This program is further sheltering
individuals from the true costs of their consumption decisions. The
cars for which the subsidies apply are supposedly greener, but given
that people already have functioning cars, it is not clear to me that
the environmental
costs
of manufacturing new ones and disposing of the old ones are outweighed
by the expected gains in fuel efficiency, particularly given that our
consumer society gives these cars a very short lifespan before a new
model “must” be purchased.
Moreover, it is becoming more and more obvious that the environmental
crisis is coming to a head and will impose lifestyle changes on us
during our lifetime. Now would have been a good time for the
government to use this stimulus money not to prop up what could
arguably be called a luxury industry that contributes to the problem
by promoting an expensive lifestyle, but rather to encourage viable,
practical, and attractive public transportation across the country.
For both fiscal and environmental reasons (and arguably ethical
reasons as well), the government should be leading and inspiring us to “use it up, wear it out, make it do, or do without.”
