[C]ash-for-clunkers was supposed to last a few months, not
a few days. So, just imagine the potential explosion of the
costs of health care with the incentive of "cheaper" heath
care. As fellow AIP blogger Jimmy Bise said earlier,
"bureaucrats in Washington are absolutely horrible at
predicting what actual human beings will do in a given
situation," and there are so many variables here that
appear to have been ignored, that there is more reason to
be concerned about the surprise "success" of cash-for-
clunkers, than to be encouraged by it.
Was Cash-For-Clunkers A Success?
By Matt Margolis on Cash for Clunkers
AIP Blog
The White House will certainly call cash-for-clunkers a "success," and indeed its popularity was far greater than government estimates.
But, the program was also a victim of it's success. Obviously, car owners found huge incentive in the potential $4,500 rebate, a lot more than anticipated. These are people who may have been "happy" with their current vehicles, but saw an opportunity to take advantage of.
Just as Obama says that under his health care plan you can keep your current plan and doctor if you are happy with them. Well, "free" health care is sure to be just as attractive an incentive as a $4,500 rebate on a new car, and cash-for-clunkers was supposed to last a few months, not a few days. So, just imagine the potential explosion of the costs of health care with the incentive of "cheaper" heath care. As fellow AIP blogger Jimmy Bise said earlier, "bureaucrats in Washington are absolutely horrible at predicting what actual human beings will do in a given situation," and there are so many variables here that appear to have been ignored, that there is more reason to be concerned about the surprise "success" of cash-for-clunkers, than to be encouraged by it.
The short-term economic boost that may result will likely be wiped out by the long-term negative effects from the unintended consequences of cash-for-clunkers. The bursting of the housing market bubble should have served as a warning to the Obama Administration. The initial incentive of a $4,500 rebate on a new vehicle will likely have caused some consumers to purchase cars they otherwise could not afford (to maximize their rebate with a car of higher fuel economy) and will put extra strain on their budgets by adding a new monthly car payment on top of it. With the economy the way it is, who knows how many who took advantage of the program over the past few days will still have their job by year's end?
No job + new car payment = bad news.
Even people who still have their jobs will have to tighten their belts in the long run after getting rid of a car already paid for sooner than planned.
As I have mentioned before, I recently bought a new car. Between the economy and my upcoming wedding, this was not a good time for me to buy a new car, and I had no intention of buying a new car. I had to because of a car accident that left me little choice. After years of having no car payment to make, the last thing I needed in this economy was a car payment. I was happy enough with by old car, but the car accident was as much an incentive to get a new car as a $4.500 rebate. And, let's face it, this week, a lot of people saw the $4,500 government rebate that was heavily advertised, but not the monthly car payments that would follow.
When banks were forced to give mortgages to people who would normally not be given one, that started a chain reaction that crippled the country's economy. So, what will happen when people start adjusting their budgets to compensate for their new car loan? Think that will have no impact on consumer spending? Will they just stop paying back their car loan since the government can just simply bailout the auto industry again?
The government truly is lousy at guessing how the public will react to incentives like this. If the government miscalculated on cash-for-clunkers (which targeted a relatively small part of the population) we should see quite clearly it is not worth the risk of finding out just how bad they've miscalculated on government-run health care - which is "supposed to" cover all Americans.
I'll trust the free market over an administration that thinks the stimulus worked.
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