Autos: Flunkers For Cash

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[Policing Wall Street]

As usual the road to perdition is paved with good intentions.

The United States is in a recession. The federal government has taken the lead from Germany and is offering cash –as much as $4,500—as an incentive for Americans to turn in less fuel efficient automobiles for more fuel efficient automobiles.

This program was done to spur automobile sales. Its main effect will be to speed up the replacement of cars from next year to this year. But this program is wrong on another aspect. It places an unfair burden upon poor Americans, who cannot afford to purchase new cars.

How? You might inquire. The program calls for the destruction of the engines by solidifying the engines with sodium silicate. The sodium silicate, which is sometimes used to plug leaks in faulty engine valves, renders the engines totally useless. 

This means that an engine cannot be rebuilt.  The engine cannot be stripped and its parts disassembled and used to replace worn parts in other cars.

This of course raises the price of rebuilt engines because the engines and engine parts of these “clunkers” cannot be utilized to repair other car engines. This shortage of engines then results in higher prices for auto parts.

Also, the prices of used cars increase because the quantity of cars, which are traded in for new cars decreases as a result of the destruction of the cars. This decreases the supply of used cars and increases the price of used cars.

This jump-start to the economy, by providing incentives for the purchase of new cars, while favorable in the short term, may be detrimental in the long term as consumers may look for government incentives to purchase cars.

Ironically, it was precisely government subsidies in the form of exemptions to fuel economy requirements that was partly responsible for the decline of the American auto industry.

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