Wealth Without Risk: Cash-for-Clunkers, Part III
We all want wealth without risk. So isn't "cash for clunkers" a way to get wealth without risk? See our last post. Then you decide.
Meanwhile, last time we asked whether this program contributed to the common good. At first blush you'd think it did. Car company sales go up, millions get new cars. Sounds good to me.
But hold on. This is a government program we're talking about. And government programs are notorious for being subject to the "law of unintended consequences." And this one seems to have it's share of those unintended consequences.
The really ironic thing is that two of those negative consequences focus on the poor. How can it be? The program's intended to help car companies and those who've got old cars. The presumption is that folks with old cars probably aren't the richest folks. So how do the poor suffer here? Like this.
First, charitable organizations that rely on people donating their old cars are getting stiffed. The folks who would have donated a car to them are instead exchanging that old car for that $4,500 credit towards the purchase of a new car. So the charities are left holding the bag. Any charity that's out there helping people, and has relied on donations of old cars is now running out of funds to help people.
Second, those old cars aren't available to be sold to people who can't afford new cars. And who used to buy those old cars? Frugal people, to be sure. But poorer people too.
Remember that the clunkers that are turned in are destroyed, not put on the market for sale. So it's just common sense. Take away the store of old cars available at a cheap price and you're pricing out a whole segment of the population that can't afford the more expensive cars. You're pricing out the poor.
Something's not right here.
Meanwhile, last time we asked whether this program contributed to the common good. At first blush you'd think it did. Car company sales go up, millions get new cars. Sounds good to me.
But hold on. This is a government program we're talking about. And government programs are notorious for being subject to the "law of unintended consequences." And this one seems to have it's share of those unintended consequences.
The really ironic thing is that two of those negative consequences focus on the poor. How can it be? The program's intended to help car companies and those who've got old cars. The presumption is that folks with old cars probably aren't the richest folks. So how do the poor suffer here? Like this.
First, charitable organizations that rely on people donating their old cars are getting stiffed. The folks who would have donated a car to them are instead exchanging that old car for that $4,500 credit towards the purchase of a new car. So the charities are left holding the bag. Any charity that's out there helping people, and has relied on donations of old cars is now running out of funds to help people.
Second, those old cars aren't available to be sold to people who can't afford new cars. And who used to buy those old cars? Frugal people, to be sure. But poorer people too.
Remember that the clunkers that are turned in are destroyed, not put on the market for sale. So it's just common sense. Take away the store of old cars available at a cheap price and you're pricing out a whole segment of the population that can't afford the more expensive cars. You're pricing out the poor.
Something's not right here.
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