Cash for clunkers is the poorly devised program for the government to buy older cars for $4500 if people purchase a new car. The government then destroys the older car.
So what's the driving force of a program that destroys value, hurt charties, and hurts business (the used car market, auto parts dealers, etc)?
Answer: The government takeover of GM. They want to show good results after the takeover, so they devise an incentive program to boost sales. They want to show that the government takeover has succeed in increasing sales (at least temporarily). Who cares about long term aggregrate economic effects. Who even cares about the long term implications for the car companies. It's all about the soundbite in 6 months about how successful the government takeover has beeen.
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