The department of unintended consequences: Cash for Clunkers will impose what amounts to a new tax on the working poor:
Hundreds of thousands of “clunkers” headed for scrappers may cause already rising prices for used cars to head even higher, dealers and market analysts warn.
The popular cash-for-clunkers program, extended by Congress last week with $2 billion more in federal incentives, requires that all the old fuel guzzlers traded in are scrapped – not resold. That means up to 750,000 vehicles will never find their way into the hands of another owner. Many are at the end of their useful lives, but others, with years of life left in them, normally would be resold.“Those are the cars that lower-income families need,” says Geoff Smartt, owner of Smartt Cars in Caldwell, Idaho.
Used car prices have risen about 5% on average in the last year, says Tom Webb, economist for Manheim Consulting, a branch of a major used car wholesale operation. Fewer new car sales have meant a drop in recent-model trade-ins. Car rental companies also have reduced supply by cutting their fleets. That’s resulted in fewer castoffs for used car lots.
A couple of points. Credit markets being what they are today, unless you have good credit or cash in hand, it is unlikely you are buying a new car these days. That means the benefit from the program is going to those fairly well off by today’s standards. (I’ve posted about one of those people earlier). Driving up the cost of used cars will hurt the working families that do not have sterling credit. The program is unlikely to have generated any real new demand, just to have shifted existing buying demands. There is likely to be a drop in sales when the new funding for the program runs out. Lastly, the “tax” (it isn’t exactly a tax, per se, but it amounts to the same thing) is paid to the dealers, not the government.
In other words, this was a bad idea for the nation, even if it is benefiting some individuals, no matter how you look at it. It is a particularly bad deal for those who can least afford the hit they are going to take because of this.
(There was another article on charities worrying about the drop in donated vehicles in the USA Today print edition, but I can’t locate it online. So that is another item against this clunker of a program.)
Coincidentally, I just donated my clunker to charity today. No way was I going to take advantage of the government plan, just on principle.
It always works out that way. The ones who suffer the most from the ill effects of socialism are the weak and the poor. They get the illusion of a handout, but the reality is rationing and shortages of everything. And, they never see or miss the opportunities that never occur.
Of course, if the socialists get their way, most of us will be poor. And many of us will think we are fortunate when there are free cabbages for those who wait in line, and plenty of blue and red pills at the free clinic.