NITA LOWEY LOVES BREAKING WINDOWS

Voted YES on $2 billion more for Cash for Clunkers program.
(Jul 2009)

Total cost: $3 billion
Edmunds.com, the premier resource for online automotive information, has determined that Cash for Clunkers cost taxpayers $24,000 per vehicle sold.

There is a clever anecdote called the Broken Window Fallacy that gives insight into the evils behind the Cash for Clunkers Program. The parable describes a shopkeeper whose window is broken by his young son, and who then has to pay for a glass maker to fix it. To the casual onlooker this is perceived to stimulate the economy because there is a boom to the glazier's business. However, the onlooker ignores the cost to the shopkeeper.

Since the shopkeeper was forced to spend his money on a new window, he could no longer spend it on something else, such as bread or shoes. The boy's actions may have benefited the glazier, but at the expense not only of the shopkeeper, but the baker and the cobbler. As a result, the child, in fact, made the town poorer by at least the value of one window, if not more.

But now suppose it was discovered that the little boy was actually hired by the glazier, and paid for every window he broke. Here in lies the truth behind the Cash for Clunkers Program.

By voting for this bill, Nita Lowey is wreaking havoc on the free market system, all in the name of stimulating the auto industry and combating global warming. When in fact it does nothing but weaken the American economy and take away the personal liberties of its citizens.

Here are the actual effects of this stimulus plan:

• More Debt. Americans who cannot afford to buy a new car are heavily persuaded by the large rebates to stretch their budget even further and go into even more debt to take advantage of this deal. This is the housing bubble all over again, but now with automobiles.


• Destruction of Charity. Charitable donations of "clunkers" fall dramatically since the dealers were required to disable the cars, leaving the poor and the truly impoverished without any means of transportation.


• Increased prices of used cars. Prices are decided by supply and demand, and as the supply of available used autos shrinks, low-priced vehicles become more costly to purchase. Auto parts face the same price increase making it more costly for the poor to keep their cars running.


• Increased Driving. By subsidizing fuel-efficient vehicles more driving is encouraged which causes total fuel consumption to decrease less than expected.


• MPG. New federal data analyzed by The Associated Press finds that the single most common swap, at an occurrence rate of more than 8,200 times, involved Ford F-150 pickup owners. The fuel economy for the new trucks ranges from 15 to 17 miles per gallon, which equates to a mere 1 to 3 mpg improvement over the clunkers.


• Loss of Freedom. The government directed the allocation of funds upfront by selecting the industry that would receive the subsidies, and the administration in power set the rules for allowable purchases under strict guidelines that induced the consumer to purchase smaller, more “green friendly” automobiles that conform to its long-term, environmental ambitions.
  
• Waste of Capital and Resources. Used cars are destroyed depleting valuable resources and capital that could have been reused or repurposed.
  
• Redistribution of Wealth. Money that would have been spent elsewhere is now reallocated to the well-connected unionized auto industry causing many other businesses to lose profits.

We have to understand that by tampering with the free market system with incentives like this we are only creating an artificial boom period. In the long run, this is not helping the auto industry but only setting them up for a bigger fall. Let us not forget that this $3 billion dollars is only the tip of the iceberg. We have been continually bailing out the auto industry for the last 30 years at the consumer's expense.

In all, this program was little more than a political redistribution of wealth from the people of America to the Nita Lowey’s power base which includes unions, environmentalists, and social justice bulldogs. But we really shouldn't expect anything else from her.

Further Reading:
Nita Lowey Loves John Maynard Keynes