Cash for Clunkers: another attack on Capitalism by the Fed

As part of a near $trillion stimulus package our Federal Government-specifically Barack Obama-has stuck in a little bill called “cash for clunkers”. This bill grants up to $3500 in trade in value, towards a new car, for cars that are no more than 25 years old and get 18 mpg or less.

For proper implementation this program is being spearheaded with car dealerships nationwide, which brings me to a serious problem and points out the dangers of our Federal Government getting involved in any direct way with our economy: How is this going to affect the real world values of our cars?

Under this bill all cars which fit the criteria are valued the same. That early 1990’s clunker of a Buick, with 150k and sitting on blocks, is potentially worth the same as your 2001 Hummer that you paid $40K for.

Even worse, the newer your car, the less its value becomes.

Going back to the Hummer-an easy vehicle to pick on in this case-what about all those which are 5-8 years old? They are still blue booked in the area of $10-20k and now dealerships will be giving no more than $3500 for them because there is no incentive to do so. This same logic applies to any and all SUV’s which fit the criteria of a “cash for clunker” because there is NO demand for any of these vehicles currently due to the price of gasoline and economic restraints.

An even worse part of this bill is that all of these cars which are traded in under the “cash for clunkers” bill is that they must be scraped-meaning they can’t be resold as is which makes them all worthless. This, in effect undermines Capitalism at its most basic of levels, making the “cash for clunkers” idea not only a bad one, but just another prime example of why the Federal Government has no clue what being “productive” means and why it needs to be no more than a regulating body for only specific sectors of economy. Needless to say the cash for clunkers bill is a bad one, and we won’t be seeing the ramifications of this “feel good” legislation for years to come. My only hope is that the automotive industry survives it. The Big 3 already have enough issues to deal with, but with the Fed resetting the value of used cars, it will only be harder for the American automotive industry to survive as a private enterprise.

But then, seeing as how the Fed already owns nearly 2/3 of GM and Chrysler, perhaps that is exactly what they want to happen so as to take control of the entire industry themselves.

Of course, the only saving grace of the cash for clunkers program is that it is temporary, but however long it lasts is relevant if the damage to the value of cars becomes permanent.