Cash for Clunkers: A lesson for single payer advocates.

First some background. A Nissan Versa hatchback sold for $13,500.00 in May 2008, less $1,500.00 cash incentive for a net price of $12,000.00. Earlier this year that same model was advertised at $10,000.00. Yet the price for the very same model since the Cash for Clunkers program began is $16,500.00 A price of $16,500 less a $4,500.00 from the government is $12,000.00. The same price the car could be bought for in May 2008 and $2,000.00 more then advertised price earlier this year.

  As of today, the Cash for Clunkers program is out of money, maybe. No one will say for sure, but the Obama administration is asking for more money from the tax payers to keep it going.  Unless the Senate approves an emergency funding package that triples the tax payer’s investment in this program, the government may not even be able to deliver the payments that have been promised. Surprised?

  Lessons we need to learn

  1. Government estimates of demand and costs are ALWAYS too low.
  2. Prices on goods and services go up when the government is involved, not down.
  3. Government subsidizes waste and bad habits.

These three lessons bode ill for health care reform.

 1. Money. The administration is back demanding we triple the amount of tax money that tax payers are putting into to a program to reward some people to give up their cars. Cars that probably would have been traded in soon anyway, by anyone who can afford a car payment. Why are the esitmates off so much? Because the members of the Congress who plan these things don’t have a clue. If the government gives away health care services, the available services will be swamped by the those people rushing to get theirs before the money runs out. Who believes the money won’t run out in any given year? Eventually some people will get more than there share, others less and some nothing.

 2. Predicitions of savings. To think we are going to save money because the government manages health care is at best childish. Unless the government has some place to transfer the costs the prices will go up. Right now health care costs for those subsidized by the government are transferred to those who pay insurance and to tax funded programs. When insurance is government mandated, the excess costs will all come out of taxes. And prices will go up across the board by the medical care providers to cover the unknown. What is the unknown? Ask the car dealers who are out on a limb hoping to get paid as promised by the government under the cash for clunkers program. Any bets that the next “boogie man” attack by the president will be those “high paid” car sales people demanding to be paid all those excessive commissions they earned selling to the poor folks?

 3. Will government encourage efficiency and good habits?  Part of the reason the dealers have to raise their prices is they can’t resell the clunkers, not even for parts. This is a huge distruction of wealth and the loss of a tremendous income stream and the associated wages, earnings and taxes being destroyed. And lets not forget that goverment is  encouraging the least fortunate to go in debt for something they can’t afford.  Think about who is buying  cars at these inflated prices? People who take the government program because it appears like a deal, or because they could never get financed otherwise. People with a 1/3 deposit on a car can always get financed, even if their credit is bad. Which means, with that big deposit, plenty of people qualify for car loans they would never otherwise get. So the government is encouraging more borrowing by people who are least able to withstand an extended recession. They are paying a premium to buy vehicles they wouldn’t otherwise be able to afford. Isn’t this exactly how the housing mortgage crises began?


Solvo Reor

Cross Posted at www.freedoms-light.org