Ken Klukowski: My Toddler Just Bought His First Car


ACRU Staff


August 7, 2009

This column originally appeared on on August 7.

My son just bought his first car this week at age sixteen. Not sixteen years; he’s only sixteen months. Yet Congress just forced my toddler to buy a car this week, a car that he’ll never even drive.

That’s what “Cash for Clunkers” does; it forces our kids to buy cars. Are we now so blind and shortsighted that we don’t even understand what we’re doing anymore with this massive government spending, incurring intergenerational debt?

This blindness is not the only thing wrong with this problem. For one thing, it’s astoundingly bad economic policy to give incentives to destroy useful assets. These “clunkers” are perfectly usable cars. In tough times people should hold on to those cars to get all the useful life out of them that they can. It’s great that they have a serviceable car for which they don’t owe monthly payments.

For another thing, this hurts lower-income people, who own most of these “clunkers.” It encourages them to get rid of a car they don’t make payments on in exchange for a more expensive car for which they might have payments (because the trade-in only covers part of the purchase price of these new cars). By destroying these older cars, we’re also destroying the supply of spare parts for repair shops to service those models over the coming years, making it more expensive to repair these cars down the road.

This hearkens back to the Great Depression. Crop prices plummeted and many farmers couldn’t make a profit. So the government ordered crops destroyed and paid farmers to let fields lie fallow, all to constrict supply and drive up prices.

Of course, the reality was that people across the country were starving and desperate for food. Analysts look back on those government actions in the 1930s with the same scorn that doctors look back on bleeding patients with leeches to “heal” them. From a modern economic standpoint, those crop policies were nothing short of barbaric.

Yet here we are doing the exact same thing with used cars. It’s disturbing to realize that the current federal government knows nothing of what we’ve learned about economics in the past seventy years.

Obama took over an industry and paid for it with billions in new government debt. Now he puts us deeper into debt to borrow more money to “stimulate” that same industry by destroying cars and enticing people to take out loans to buy more cars. First the government bought these businesses, now they’re using our money to try to prop up those same businesses. They put us all in debt, then added on more debt, and now they’re asking us to take out car loans, piling up still more debt. Will this ever end?

It becomes even more troubling when you further realize that this is the same government that is now taking over whole sectors of our economy, where Washington will impose these bizarre and destructive policies on companies whose executives know that these policies are financially suicidal, but can’t stop the government from doing them anyway.

Heaven help us if these same Mad Hatters take over healthcare.

For all those problems, however, none match the tragedy that Washington is inflicting on our children.

The government is operating at a deficit. It has no money. So this “Cash for Clunkers” program is being paid for by issuing long-term government debt. This debt will be accumulating interest for the next thirty years, waiting to be paid.

The Obama administration’s solution to these staggering deficits will be to try to massively raise taxes. In the name of saving thousands of jobs in the auto industry, this government will enact crippling taxes that will destroy millions of jobs.

So in this case the cure is worse than the disease by an order of magnitude. It’s scary that this Congress and White House don’t have a basic grasp of free-market economics.

Most of the newer cars being bought in this latest boondoggle won’t be on the road when my toddler reaches driving age. But that debt will still be there, and still be racking up interest.

So my son and yours will be paying this off throughout their working life. They’ll see none of the benefits, and will simply be stuck with the bill.

May our children forgive us. We’re destroying their financial future with these ludicrous policies.



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