Used Cars

You got a fast car
And we go cruising to entertain ourselves
You still ain't got a job
And I work in a market as a checkout girl
--Tracy Chapman

A proposal is on the table to renew the gov't's Cash for Clunkers program. It's already chewed thru $1 billion in short order. This is the classic government subsidy. Applying Hazlitt's method, we can forecast the consequences.

Who it helps. Domestic carmakers, people buying new cars, politicians catering to these special interest groups.

Who it hurts. Taxpayers, people who bought used cars in the past, entrepreneurs who want to break into the car industry.

Short term effects. Gooses demand, keeps inefficient operators in the game. supports prices.

Long term effects. Overcapacity, reduced demand (buyers push up purchases to present period), lower prices, more debt, lower investment (taxpayer resources squandered).

Few forecasts could be more certain.