As the Lew Rockwell blog pointed out, Congress is now considering several ideas to encourage Americans to buy new cars. Ignoring deeper economic problems with this plan, such as the importance of saving rather than spending to increase capital and promote economic growth, the plans are foolish on even the simplest level.
The worst of the bunch is termed “fleet modernization,” and is designed to give away vouchers toward the purchase of a new car to people willing to junk their old cars:
Crushing the old car has two benefits. First, it ensures that the consumer’s purchase of a more efficient vehicle actually has a net environmental benefit. Second, it prevents a glut of used cars on the market, which would reduce trade-in values for new car buyers, which would cut into the sales incentive effect.
In reality, the industrial processes of junking old cars and producing new cars would likely outweigh any benefits to the environment brought by the increased fuel efficiency. Moreover, even if this plan successfully boosted new car sales, it would only be doing so at the expense of some other industry where consumers would otherwise have spent their money – used cars, real estate, travel…the possibilities are all but endless, and also all but ignored.Published in