Tuesday, August 4, 2009

The AAA all over again?

Jason Kuzinicki at Positiveliberty links to a post that suggests Congress's "cash for clunkers" program is reminiscent of some of the wasteful destruction of foodstuffs under FDR's Agricultural Adjustment Administration. I hadn't seen the connection before, but I think I see it now.

For those who aren't familiar with the program, here are the details: the federal government has promised to reimburse car buyers (indirectly through car dealers) who trade in their own gas-inefficient cars for newer, more gas-efficient cars. Apparently, the program has been a "huge success" (although there is some dispute about it: see this post from the Volokh Conspiracy) and the original $1 billion or so allocated for the purpose has all been spent and Congress is busy trying to pass another law to allocate yet another $1 or $2 billion to the program.

The comparison with the AAA is that as the AAA destroyed food in order to drive up the price of food to help farmers, so this program is destroying cars in order to help out car dealerships and car companies.

Where the comparison breaks down, in my view, is that this program, even if the several billions sought are devoted to it, is not as far reaching as the AAA. (I'm not enough of an expert--in fact, I'm not an expert at all--on the AAA, but I wouldn't be surprised if the AAA was much more expansive....at the very least, Congress had created its own administration to oversee the program.)

Another point where comparison breaks down is that one of the stated justifications for the program and, presumably, one of the reasons why it was passed, was to provide for more environmental friendly cars and thereby help the environment. I don't think the AAA had such a goal (maybe I'm wrong....it wouldn't surprise me if the AAA tried to address such environmental concerns as the dustbowl....again, my ignorance is conspicuous.)

Most of my friends seem to cheerlead this cash for cars program, and mostly they harp on the supposed environmental benefits. There very well may be such benefits, and maybe the economy is helped also (the links above dispute that claim, but then again, the authors aren't necessarily sympathetic to government intervention in markets...at the same time, they're not knee-jerk reactionaries either).

But one thing is clear: the government is giving away tax money to subsidize the auto industry.

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