Recycling the Clunkers

by Burt on October 8, 2009

One of the fascinating, but disheartening, aspects of studying history is watching a strange idea rise, then fall dramatically, and then be reborn in new garb only to collapse dramatically once again.  During the Great Depression, for example, when farm prices were low, some college professors and agriculture “experts” came up with a brainstorm:  Let’s pay farmers not to produce on part of their land.  If we do that, the argument went, then overproduction would cease and farm prices would naturally rise.   When this program, the AAA, went into effect, some farmers, who had already planted crops and bought livestock, were digging up their crops and killing their pigs to comply with the federal command, Thou Shalt Not Be Fruitful and Multiply.  We thought we could reach prosperity by destroying crops one year and not planting them the next. 
 
The inevitable failure resulted.  Aside from the expenses–the checks to the farmers and the payments to the army of inspectors who were measuring the farm land–we soon had shortages of the very crops we were paying farmers not to grow.  For example, two years after the program started, the U. S. had to import 36 million pounds of cotton and 34 million bushels of corn.
 
In a somewhat similar manner, the Cash for Clunkers program this summer was paraded as a breathtaking innovation to stimulate car sales and help the environment.  We paid thousands of people more than $3,000,000,000  to turn in their clunkers, have them destroyed, and get newer more gas-efficent vehicles.  In other words, we paid people to destroy their cars and some thought it would increase prosperity.
 
What was the result?  According to the Wall Street Journal “new car sales for September, the first month since the clunker program expired, sank by 25% from a year earlier.”  The Journal concludes, “so all the program seems to have done is steal those [car] sales from the future.  Exactly as the critics predicted.”  Exactly as history would have predicted.

{ 2 comments }

jonathan October 8, 2009 at 11:27 pm

Henry Hazlitt would be proud. Great blog, I enjoy

Wakefield Tolbert October 16, 2009 at 2:26 pm

Well said, and well placed.

I read that WSJ article too.

But I liked your add-ons here.

And this is the same crowd that now presumes to tell us of massive savings in the new health care bill.

Of course.

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