Have you missed the opportunity to get cheap transportation because of the “Cash for Clunkers” program?
Have you lost, or been denied, a job because of the “Cash for Clunkers” program?
Seldom have we witnessed such an apparently successful government program as the Car Allowance Rebate System (CARS) or “Cash for Clunkers” program. (A media success at least.) But, government programs don’t come for free. We should call this program “Jobs for Clunkers.”
First, in addition to taking polluting cars off the road, this program has taken a lot of cheap transportation off the road. That cheap transportation might have been available to get people to the jobs that also don’t exist because of “Jobs for Clunkers.”
The cost of driving a car consists of a lot more than the price of gasoline. The initial cost of the vehicle can represent the most significant part of the cost per mile of driving a car. If you buy a “clunker” for $1,500 (probably closer to the value of cars turned in) that gets 12 mile per gallon, you can drive a long way before you will have spent as much as you would after buying a car that gets 35 mile per gallon for $20,000.
In addition, the costs on the “clunker” tend to track your cash flow more closely. When you drive to work, you pay for gas; when you don’t drive to work, you don’t pay for gas. The payments on the high-mileage car come due whether you work or not.
Second, we seem to have forgotten in this country that economic activity and job growth requires capital accumulation. With the CARS program the government has taken $3 Billion away from savers and given it to otherwise unmotivated car buyers. Those buyers will saddle themselves with more imprudent debt (a form of dissaving.)
Some argue that this program has given a boost to the auto industry, but consider what others have given up for them to get a one-time boost.
Investors who would have bought plant and equipment to create jobs for years to come, no longer have access to the $3 Billion (plus $Billions more in dissaving) in capital they could have used for those investments.
We’ll never know how many jobs the CARS or “Jobs for Clunkers” program has cost the economy.