[OT] Calculating "Clunkers"

Wade Preston Shearer wadeshearer.lists at me.com
Tue Aug 4 08:33:39 MDT 2009


CNN ran a special commentary by a guest author today on the Cash for  
Clunkers program. The author is Jeffrey A. Miron is senior lecturer in  
economics at Harvard University and a senior fellow at the Cato  
Institute.

http://www.cnn.com/2009/POLITICS/08/03/miron.clunkers/index.html


In addition to highlighting most of the points that we have already  
made, he goes on to point out the following:

"Government policy should not favor some industries at the expense of  
others, but that is exactly what cash for clunkers does. The program  
helps consumers who can take advantage, and it increases profit and  
employment in the auto industry. But funding for the program comes  
from all other taxpayers, so it harms the consumers and industries not  
supported by the program.

"Thus cash for clunkers creates winners and losers based on political  
considerations, not economic values. Whether or not government  
spending is a good way to stimulate the economy, the specific kind  
embodied in this program is misguided because it distorts the  
economy's allocation of resources across consumers and industries.

"Any spending stimulus, of course, tends to favor some sectors over  
others, which is one reason stimulus is better accomplished via  
reductions in tax rates, not increased spending. Tax cuts improve the  
incentives to work, save and invest, thereby making the economy more  
productive going forward. Reductions in tax rates are neutral across  
sectors and therefore let private valuations of costs and benefits --  
not political connections -- determine winners and losers."
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