Inflationomics

Cash for Clunkers Everyone

Cash For Everyone

Everyone has heard of Cash-for-Clunkers; i.e., the U.S. government’s program of giving money to someone who trades a junk vehicle in to purchase a new vehicle. In other words, a subsidy for something that’s worthless (or nearly so) as an inducement to spend money and possibly go into debt in the hopes of helping the economy revive (as if the economy were something other than the aggregate of its parts). In short, it’s a program that gives people money for nothing, if people will behave in a way that is desirable to the government’s goals.

In this case, the government has singled out individuals with old gas-guzzling cars and encouraged them to help out the auto industry. This is nothing new! They’ve been doing this for years. Consider the arms industry. They’ve been paying military supply companies billions of dollars to make weapons that are either used to kill our enemies or subsidize our allies. Consider social security. They’ve been paying people to retire, or to not work, or to be disabled for more than a generation now. Consider the IRS. They’ve been encouraging people to work less, hide their money, or leave the country for years. Consider military personnel. They’ve been getting paid to protect the U.S., police the world, or seek out weapons of mass destruction ever since WWII. Consider welfare programs. They’ve been encouraging people to have more children, be destitute and dependent on the government for years. Consider Fed induced below market interest rates. They’ve been encouraging sub-prime borrowers to buy homes for years.

Perhaps it’s time for a new program—a program to encourage people to become productive, thrifty, and invest their funds wisely. How could this be accomplished?

  1. To encourage people to be “productive” has to be defined first. Does productive mean producing weapons of mass destruction, or goods that are desired by consumers? If we define “productive” as producing goods that are desired by consumers, then someone must consult with the consumers to see what they want. This is done most efficiently by entrepreneurs who have a profit motive to do their best to satisfy the consumers and earn a profit—not by a government bureaucrat whose pay is limited and who uses taxpayer funds. If we define productive as producing weapons of mass destruction, then, once again, the entrepreneur with a profit incentive will do the best job of constructing those weapons. Either way, the best way to accomplish our goal of encouraging people to become “productive” is to give entrepreneurs a profit motive to produce those desirable items. Of course, the more resources we direct towards destructive products, the fewer resources we will have to satisfy consumer wants!
  2. To encourage people to be thrifty requires two things: 1. a stable currency or money—no inflating at will. No hanky panky by government bureaucrats! 2. a market rate of interest to be paid on their savings and for borrowed funds. Of course, it wouldn’t hurt to let them keep the interest they earn on their savings rather than taxing it away.
  3. To encourage people to invest their funds wisely, we must allow them to invest their money themselves, rather than doing it for them and guaranteeing them the results. In other words, let people invest for their own retirement and for their family’s future rather than relying on a government created Ponzi scheme such as Social Security for their future. There’s a limit to how long government forced redistribution of wealth can last.

If we could do these three things, there would be more cash for everyone, not less.

Robert Jackson Smith

For comments, suggestions, or replies to the author, please e-mail