Cash for Clunkers Crash Dummies

One reason government programs seeking to stimulate the economy never work as advertised is that they are artificial in nature. While the program may cause consumers or business to act in a certain manner, those actions are never permanent unless the program is permanent. Maybe that's also why government programs - once begun - are so hard to get rid of.

The recently completed "Cash for Clunkers" program is a perfect example of the artificial nature of government attempts to stimulate the economy. The program - which offered up to $4,500 to those willing to trade in certain low-MPG cars for new high-MPG cars - helped auto dealers sell lots of new cars in July and August. Now that the program has ended, however, auto sales have plummeted back to their previous low levels.

All this program did was artificially shift auto sales into July and August that would have taken place anyway in September or October or later. It's unlikely any person bought a car who would otherwise eventually not have done so without being given $4,500 in taxpayer subsidy.

Worse yet, automakers reacted to this artificial shift of car purchases by announcing increases in production. Barring a sudden, unexpected upturn in the economy, the extra cars they are building are going to sit on lots for months, eating up any benefit dealers might have realized out of Cash for Clunkers in higher inventory carrying costs.

The answer to this nation's economic problems will not come from stimulus plans, Cash for Clunkers or any other artificial government effort. Only the market, freed to work without artificial constraints or competition from government, will lead to prosperity for all Americans.