Cash for Clunkers Redux - How Stupid Can They Get?

[JohnH]

http://www.washingtontimes.com/blog/watercooler/2011/mar/29/cash-clunkers-2-dumped-capitol-hill/

Just when you think maybe one failure would get their attention, the geniuses in Washington start floating a plan to double down on stupidity. Can't these clowns ever get it? Let the free market make its own decisions and stop trying to create a command economy.

[Black Bart]

I have questions (just in case it flies)

http://www.washingtontimes.com/blog/...-capitol-hill/

Just when you think maybe one failure would get their attention, the geniuses in Washington start floating a plan to double down on stupidity. Can't these clowns ever get it? Let the free market make its own decisions and stop trying to create a command economy.

Do I get to KEEP my faithful old clunker? It still sputters to the dumpster and back okay and I'm sentimental about it -- pourin' hemlock (or whatever) down its oilspout would be awful hard to do.

Do I have to pay back the $7,500 over the next 15 years?

Can I get a Long-Time Carbuyer Credit for the other $33K? I have owned cars for 50 consecutive years out of the last 50.

RSVP

[kpangelinan]

Hahahahahaha............

Do I get to KEEP my faithful old clunker? It still sputters to the dumpster and back okay and I'm sentimental about it -- pourin' hemlock (or whatever) down its oilspout would be awful hard to do.

Do I have to pay back the $7,500 over the next 15 years?

Can I get a Long-Time Carbuyer Credit for the other $33K? I have owned cars for 50 consecutive years out of the last 50.

RSVP

Hahahahahahaha!!!! I'd qualify for the Long-Time Carbuyer Credit as well!!!!

Funny!

[Bees Knees]

Let the free market make its own decisions and stop trying to create a command economy.

Well, an argument can be made that all tax credits based on purchasing something do the same thing, whether it is a credit to buy energy efficient windows, a credit to buy solar panels, a credit to buy a new home, or a credit to buy an electric car. The very purpose of a tax credit is to get someone to spend money on something they might not otherwise spend it on, if left up to the free market.

[kpangelinan]

Well, an argument can be made that all tax credits based on purchasing something do the same thing, whether it is a credit to buy energy efficient windows, a credit to buy solar panels, a credit to buy a new home, or a credit to buy an electric car. The very purpose of a tax credit is to get someone to spend money on something they might not otherwise spend it on, if left up to the free market.

This is a good point, but there is certainly a limit before it becomes unsustainable from a fiscal standpoint.....most of the time, these credits are just borrowing from possible future transactions that would have gone through anyways such as the housing credit or even the cash for clunkers in my opinion (putting people in loans for newer cars when they already owned theirs outright -not everyone for sure- is just silly in my opinion).

[JohnH]

Well, an argument can be made that all tax credits based on purchasing something do the same thing, whether it is a credit to buy energy efficient windows, a credit to buy solar panels, a credit to buy a new home, or a credit to buy an electric car. The very purpose of a tax credit is to get someone to spend money on something they might not otherwise spend it on, if left up to the free market.

I agree with respect to the intent behind tax credits of this type. Personally, I think the truthfulness of that argument demonstrates its singular weakness. All resources are limited, including money. So by manipulating the tax system to induce people to spend money on a given thing means that the money isn't available to be spent on another thing. It's a zero sum game from an economic standpoint, with the only purpose being that Washington bureaucrats are substituting their judgement for that of the free market. Personally, I have much more confidence in my own judgement than that of some political operative influenced entirely by special interests and a desire to get reelected. But I understand that not everybody has as much confidence in their own judgement and they wish to have others helping them to make their decisions.

[JohnH]

Bart:

NO, you can't keep your old clunker. It must be disabled because otherwise it might enter the used car market and become transportation for someone who can't afford a new car. We can't have that sort of thing happening in a command economy.

YES, you'll have to repay the $7,500 credit, but there may be a provision to forgive the debt provided you make political campaign contributions to any politician who happens to sign the proposal into law.

NO, not only can you not get the long-time owners credit, but you're going to have to start paying extra fees just to keep driving that clunker you own now. You're destroying the environment with its emissions and you're going to have to start paying a carbon tax to atone for your environmental sins. (cough, cough)

[kpangelinan]

I agree with respect to the intent behind tax credits of this type. Personally, I think the truthfulness of that argument demonstrates its singular weakness. All resources are limited, including money. So by manipulating the tax system to induce people to spend money on a given thing means that the money isn't available to be spent on another thing. It's a zero sum game from an economic standpoint, with the only purpose being that Washington bureaucrats are substituting their judgement for that of the free market. Personally, I have much more confidence in my own judgement than that of some political operative influenced entirely by special interests and a desire to get reelected. But I understand that not everybody has as much confidence in their own judgement and they wish to have others helping them to make their decisions.

I believe our country was growing just fine before this so called induced spending came along and I also agree that much of today's tax code has been influenced by "What can get me elected?" or "What can get me another term?" and not necessarily what's best for our country in the long term.

[PIGLEE]

I just heard they are thinking about a "cash for keys". If you can't pay your mortgage, we will pay you, if you just move out.

Credits have their place, and a lot are good, but it seems like the new ones are rewarding people for doing 'STUPID THINGS".

[LCP]

This kind of BS tax policy is what motivates me to give my clients the benefit of the doubt whenever remotely possible........ and I have a tendency to be very remote and doubtful!

[Gary2]

So by manipulating the tax system to induce people to spend money on a given thing means that the money isn't available to be spent on another thing. It's a zero sum game from an economic standpoint, with the only purpose being that Washington bureaucrats are substituting their judgement for that of the free market.

If economics were simple math, we wouldn't have these great national debates.

There's a time factor. Some people spent the same money, they just spent it sooner.

There's a psychological factor. Major manufacturers report more sales, people think the economy is improving, and they start spending more. If instead of spending the money on durable goods, the same funds were spent on entertainment, the immediate effect might be zero-sum, but the psychological effect will be quite different.

There are indirect effects. If people take their Hawaii vacation funds and spend it instead on new windows or furnace, energy expenses go down, demand goes down, the taxpayer has more money to spend elsewhere, etc.

I'm not saying that all these credits and other manipulations are good idea, or bad ideas. I'm just saying that I'm not going to be swayed by simplistic arguments such as "it's a zero sum game." (Nor will I buy "It's too complex to understand, so don't do it at all." That may apply to brain surgery, but not political economics short of revolution.)

[Bees Knees]

Its not just credits. Itemized deductions do the same. The government thinks home ownership is better than renting, so it gives us a deduction for mortgage interest. The government thinks giving money to charity is a good thing, so they give us a deduction for giving to charity. The government thinks we shouldn’t have to pay so much to be healthy, so they give us a deduction for spending money on medical costs. Etc. Etc.

When I go to McDonalds to get a cup of coffee, the money window kid does not ask me how many energy efficient windows I purchased so that he/she can figure out my sales tax.

[JohnH]

---> If people take their Hawaii vacation funds and spend it instead on new windows or furnace, energy expenses go down, demand goes down, the taxpayer has more money to spend elsewhere, etc. <---

You just defined a zero sum game.

Those unspent Hawaii vacation funds mean someone in Hawaii won't have as much money to spend on new windows, new air conditioners, etc and thus their energy expenses don't go down.

The only difference being that politicians have distorted the free market with their meddling and used the power of the state to influence behavior because they believe their judgement is better than yours or mine. Either they don't understand the inherent problems with a command economy, or else they do understand them and they seek to twist the results to their political advantage. (I think it's primarily the latter, although I do give some politicians the benefit of the doubt in the sense that they truly are ignorant about these issues.)

[Gary2]

---> If people take their Hawaii vacation funds and spend it instead on new windows or furnace, energy expenses go down, demand goes down, the taxpayer has more money to spend elsewhere, etc. <---

You just defined a zero sum game.

Those unspent Hawaii vacation funds mean someone in Hawaii won't have as much money to spend on new windows, new air conditioners, etc and thus their energy expenses don't go down.

The money wouldn't have all made it to Hawaii. Some of it got burned up as fuel on the flight over. It might go to finding more crude oil, but certainly doesn't go to making more; the dinosaurs are out of business.

And that's the point. You can't simply say that the same number of dollars are just being moved around. Although that's true, they're not the only thing that needs to be measured.

[JohnH]

So are you saying that flight attendants, airline pilots, mechanics, and fuel truck drivers don't need air conditioners, doors & windows, and furnaces?

You're absolutely correct that many things need to be measured, but the measuring doesn't need to take place in Washington. The free market needs to handle that task - it uses a much better yardstick than bureacurats & politicians.