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Archive for the ‘Cash for Clunkers’ Category

Auto Companies Bailouts Squandered Taxpayer Money

Posted by Steve Markowitz on September 1, 2010

There is no better example of the government’s failed interventions into the economy than the bailouts of the General Motors (GM) and Chrysler.  To justify these bailouts the government claimed that the companies were to be too big to fail.  However, this was but an excuse for the government to redistribute wealth; taking money from some taxpayers and giving it to GM and Chrysler workers and retirees.

Had the government allowed GM and/or Chrysler to fail the total number of cars sold in the United States world have been approximately equaled to what was sold with the bailouts.  While this may surprise Progressives, demand is created by consumers.  The only difference would have been that Ford, Honda, Hyundai, Toyota and other successful auto companies would have sold more vehicles, most of which would have been made by American workers, but not United Auto Workers (UAW).  In addition,  the companies that supply parts and sub assemblies to the auto industry would have also sold similar quantities, although divvied up to different suppliers.  In other words, the poorly run auto companies would have suffered and well-managed ones would have benefited.  That is the way capitalism is supposed to work to create efficiency and the finest products at the lowest prices for society.

The government’s bailouts of GM and Chrysler distorted the market by allowing poorly managed companies and their workers to benefit at the expense of the better run auto firms and their workers.  In addition, it took funds from the same taxpayers who rejected GM and Chrysler products to keep these same companies afloat.  But this is only the start of the disruptions to the market as bailouts are gift that keep on taking.

After the GM and Chrysler bailouts, the U.S. government held (still holds) majority ownership interests in them.  This fact only increased the government’s motivation to continue propping up these poorly run companies, a perverted conflict of interest in any capitalistic system.  That led to the Cash for Clunker program in which the government paid purchasers $4,500 to buy vehicles they would have purchased anyway, but at a future time.  In simple language, the government took $3 billion from some taxpayers and gave it to others.

Cash for Clunkers is another government boondoggle that keeps on taking.  You see, the government also destroyed perfectly good used cars to prop up their investment.  That has led to a shortage of used cars, raising their prices.  Edmunds.com estimates that a three-year-old automobile today costs close to $20,000, a 10% increase in the past year.  Therefore, those less fortunate will not be able to afford the better used cars, an example of the unintended consequences of governmental meddling in the economy.

Yesterday’s Wall Street Journal reported on another perversion of the government’s intervention in the auto industry.  About $10 billion of taxpayer money bailed out Chrysler.  As part of the bailout, the U.S. government brokered a deal whereby Fiat of Italy gained managerial control of Chrysler.  Now Chrysler has announced that it will introduce the Fiat 500 subcompact in the United States through its dealer network.  This car’s engine will be manufactured in the U.S., but the car will be assembled in Mexico.  So let see, instead of letting Chrysler go under with other American manufactured cars being sold instead, the U.S. government bailed out Chrysler who will make these new cars in Mexico.  Unbelievable!

Perhaps the most outrageous part of the auto industry story is that the Obama Administration now claims the bailouts to be an example of their economic programs’ success.  Wow, have they set the bar low!


Posted in Bailouts, Cash for Clunkers, Supply and Demand | Tagged: , , , , , , , , , | 1 Comment »

A Cash for Clunkers Hangover

Posted by Steve Markowitz on October 4, 2009

ClunkersThe Cash for Clunker program, invented by Washington politicians, has been completed and it is time to assess the results.  The program included $4,500 rebates to new car purchasers at a total cost of approximately $3.1 billion dollars to taxpayers.

While 700,000 vehicles were sold under the program, many would have been sold irrespective of the rebates as older cars got trashed.  Now the automobile manufacturers and dealers are left with a hangover since the Cash for Clunker program robbed from future sales, as indicated in September’s numbers published in the Wall Street Journal: Read the rest of this entry »

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Cash for Clunkers – By the Numbers

Posted by Steve Markowitz on September 19, 2009

This Blog normally does not post those short, but often to the point, emails passed around the Internet on political subjects.  However, given the number of people who have forwarded me one in particular, I make an exception today, with a few comments of my own added.

CarsThe Cash for Clunkers program was set up as one of those “green” bills.  By giving consumers $4,500 to trade in older cars, the country will burn less gasoline.  It was also payback for the auto union, a big Democrat supporter.  Let’s see the numbers resulting from this program, assuming the average vehicle travel 12,000 miles per year: Read the rest of this entry »

Posted in Cash for Clunkers, Governmental Intervention | Tagged: , , , , , , , | Leave a Comment »