Cash for Clunkers doesn’t even have the pretense of being a tax credit. It’s a simple subsidy, in which taxpayers who aren’t selling clunkers subsidize people who are buying new cars. Like all government subsidies, including government aid to the poor, C4C is horrendously inefficient. Various observers have pointed out that a great deal of that first billion dollars in funding disappeared into thin air. On top of the taxpayer loot being stolen and squandered, we must add the value of the cars being destroyed. The final cost of this initiative will be far more than the billions of taxpayer dollars Congress has voted to pump into it. Of course, that funding is more of Obama’s reckless deficit spending, so the final total must be marked up to include the titanic interest paid to service the debt.
To properly appreciate the economic damage of such a subsidy, you must understand that even as Big Government spends these dollars, it is reducing their value. The name of the program is an insidious lie – it’s not “cash” for clunkers. If it was, you’d bring in your clunker, and somebody from the IRS would hand you a pile of greenbacks, or wire the money into your account. The $4500 must be used exclusively for the purchase of a new car, which must meet the conditions set forth by the government. The value of those forty-five hundred dollars is reduced, because you have no choice in how to spend it. Imagine how much further the value of that subsidy would be reduced, if it was only good for the purchase of a specific model, designed to meet the whims of the Church of Environmentalism and sold exclusively by government-owned General Motors.