Cash for clunkers

In principle I am generally opposed to government redistributing wealth directly amongst the population, but I admit that I do believe there should be some exceptions. So, when a program is created that does this, it has to be reviewed closely. As it turns out I have a friend who had a stroke at age 43, and now requires long term invalid care, and has essentially been an invalid for the last two years. He had no insurance at the time of his stroke, and his care is paid for through public funds. Without public funds, his standard of care would be much lower than what it is now (which isn't great), and a further financial burden would be placed on his family. Of course, if he had no family, such a burden would go to charitable institutions, or of course he could die due to lack of care. So, we have set up a system where wealth is transferred to the disabled to keep such a scenario from playing out.

Back to Cash for Clunkers. This program gives money to those that have a functioning vehicle that is old, gives them a $4,500 credit (paid to a car delearhship) The people that get this windfall are people that have older, more polluting cars that they are still paying insurance on (and so in theory driving). The old car is destroyed (scrapped/crushed, so I guess recycled), eliminating a higher polluting vehicle, and giving a more reliable vehicle to the program beneficiary. The beneficiary is rather likely to be a lower net worth individual since they have held on to a "clunker" or chosen to purchase one in the secondary market since they probably couldn't afford a new vehicle. They probably have some sort of income (even if it is a low income) as they are able to qualify for a new vehicle with the government incentive. Overall, as transfers of wealth go, I have to say that this is far better than handing over hundreds of billions of dollars to big businesses that mismanaged themselves to the point of bankruptcy. I wonder if the program would have been as popular if it was means tested though. There are some reports that a large number of sales are being made on a cash basis, so the clunker owner probably could have afforded a new car (although I must say that I don't see a problem with rewarding a frugal saver either, but it does keep the question open as to who really is benefiting).

Unfortunately, this program also seems to have shown that legislators really don't have a good grip on how much things will cost.

When I heard about the program, I questioned just how many people really could qualify for the program. Assuming the cost per vehicle was actually $5,000, with an initial budget of One Billion dollars, that would translate to two hundred thousand cars. I didn't think that there were that many "clunkers" that would be available for the program, and apparently neither did the legislators. Now I can be excused, as I didn't do any research into the number of vehicles that could qualify, but I would think that this information would be available to the legislators. Seeing as the initial funding limit was hit within two weeks for what was supposed to be a 2 month plan, somebody's numbers were off.

I still object to government redistributing wealth (note that this is a transfer not only to car purchasers, but to dealers and manufacturers). I have a hard time buying that this amounts to a general public good (as opposed to long term invalid care). And while this is still playing out, it is already clear that there are already operational and cost questions that are already making this program cost more than expected, and while I am sure it is popular with people that are getting the benefits, it's usually a good bet that a government program like this generally just doesn't wind up with the cost benefit ratio that one might hope for.