Cash for Clunkers

A couple of excellent comments on this economically-illiterate program (a program deemed a success despite, as Howard Kurtz noted, the fact that it was "a billion-dollar effort that was supposed to last till November [but] ran out of money in five days.")

John Hood:

What the federal government is now doing is using taxpayer dollars to subsidize the large-scale destruction of functional cars that would otherwise exchange hands one or more times in the used car market. This will make it harder for poor folks to purchase cars in the future. It’s an income transfer up the income distribution, at the behest of so-called progressives.

Charles Krauthammer:

What we're forgetting is that all of these cars, tens of thousands of clunkers, are going to be turned into scrap. And the question is why? America is going to be destroying tens of thousands of perfectly usable cars, destroying essentially American assets.

A parody of Keynesian economics is to say that you pay half the population to dig holes and the other half to fill them in. This is worse, because we're paying people with the bribe of cash to destroy huge numbers of assets.

Bastiat wrote, over 150 years ago, of the broken-window fallacy, in which a smashed window is looked at as an economic stimulus while completely missing the opportunity cost associated with being unable to spend the window replacement cost on different economic stimulus. The current administration and Congress apparently didn't get to the end of the broken window story, just stopped in the middle, saying, "what a great idea!" They've turned window smashing into the only part of their economic stimulus package which seems to be stimulating anything...