My Cash + Your Clunker = Washington’s Gain


Carl Graham


I’m going to stand on the corner tomorrow giving away dollar bills. Not mine, of course. That would just be silly. I’ll “collect” them tonight from random passers-by. Then I’m going to act surprised when those dollar bills disappear in a flurry because, well, who knew people would take free money? And then, just because people have obviously suspended rational thought in their excitement over getting something for nothing, I’m going to take credit for stimulating the economy by removing money from one person’s pocket and sticking it into another’s. That’s the logic of Cash for Clunkers.

This program is being hailed as a huge success because a bunch of people stood in line for free money; money that was provided by a bunch of other people regardless of their willingness or ability to pay. And this shifting of dollars between wallets is somehow supposed to stimulate the economy. As an added benefit, replacing cars that we already have with new cars that take climate-gagging resources to build is also supposed to be good for the environment. Maybe now that the self congratulatory backslapping is over, this would be a good time to break down exactly what this Cash for Clunkers thing really did.

First, it replaced vehicles with an average of 15.8 MPG with cars averaging 24.9 MPG, a whopping 58% improvement. But most people allocate their driving miles based on dollars spent, not gallons burned. So common sense dictates that much of that 58% improvement will be offset by more miles driven, resulting in little if any overall savings in gallons used or carbon emitted. And of course building those new cars and disposing of the old ones take resources and emit pollutants as well.

The program also doled out $2.9 billion dollars and got new cars for about .002% of Americans. But that money didn’t drop from the heavens. It was taken from somebody else in the form of taxes. So instead of them spending it on what they wanted, the government took it and gave it to someone else to spend on a car. The net effect on the economy as a whole is zero – in fact less than zero because the government shaved some off the top paying over 2000 people to process the paperwork. So what’s the point? Well, as someone once said, let’s follow the money.

Who wins and who loses when nearly $3 billion dollars is handed out to people who buy new cars? Well, the car dealers obviously. And that .002% who bought cars. But how many buyers traded a working vehicle that they owned for a great deal and a payment they can barely afford? How happy will they be in six months when that new car smell is gone but the payments remain? And as those inexpensive and older cars are destroyed, how many people struggling to get by will be priced out of the used car market as supply goes down and prices go up? Too bad for anyone whose engine blows up after 8:00 p.m. last Tuesday.

And of course the U.S. car industry wins; except that eight of the top ten new cars bought were foreign brands while all of the top ten “clunker” brands were domestic. I’m not sure how shipping tax dollars to Asia and destroying Americans’ property stimulates our economy, but I suspect that never really was the goal anyway.

The point of these “rob-Peter-to-pay-Paul” programs is that the government gets to pick whose wallet gets picked and whose gets filled. You want to complain about cronyism, fraud, corporate lobbyists, campaign corruption and all that? Then you have to address government’s ability to take from the many and give to the few. If Washington couldn’t pick winners and losers there would be no lobbyists, no need for campaign finance laws, and congressional ethics committees would mostly contemplate their navels. But as long as politicians can say “Vote for me and I’ll give you this and make that guy pay for it” both “you” and “that guy” will have an incentive to court their favor. And that “favor” is what keeps getting them reelected.

H.L. Mencken famously said that every election is an advance auction on stolen goods. Anything we do to increase the government’s ability to dole out goodies and pick winners and losers just perpetuates a culture of corruption and breeds waste. Our founding fathers addressed this by enumerating what the federal government could do and leaving everything else to the states and to the people. The next time you think about what the government should do for you, think about what they’ll do to someone else. And then remember: you’re someone else, too.

CARS program data source:


U.S Department of Transportation

Office of Public Affairs

1200 New Jersey Ave., S.E.

Washington, DC 20590



Contact MPI President Carl Graham at 406.219.0508, or email

The Montana Policy is an, independent, nonprofit, nonpartisan policy research center based in Bozeman. It provides analysis and information to encourage individual freedom, personal responsibility, and market oriented policy solutions in Montana.

Montana Policy Institute

67 W Kagy Blvd, Ste. B

Bozeman, MT 59715


A Co-op By Any Other Name


Carl Graham


As the conversation about health care reform turns to co-ops, it might be useful to take a step back and readdress how we got here. The “Public Option” put forward by Congressional Democrats tacitly accepted that most Americans do not support a single-payer, government-run health care system. This point has also been consistently upheld by polling data, even as the same polling data affirm that most Americans believe our health care system is broken and in need of reform.

But now the public option is ailing, too. And we’re asked to embrace its fraternal twin: the co-op. The problem isn’t really the co-op idea – although the idea certainly has problems. The problem is that many of us see both the public option and co-ops as an end-around to what Americans have repeatedly and adamantly said is unacceptable: single-payer government-run health care.

Our health care system needs reform. We need to improve access to quality care for the uninsured and for those with preexisting conditions. And we need to get medical costs under control before they drive us into national bankruptcy. No serious person that I know of is arguing otherwise. But many of those involved in the debate have been less than candid in relating their desired ends to their proposed means, leaving those of us who favor free market solutions to look for wolves in sheep’s clothing in any proposal they put forward.

The co-op idea is innocuous enough. In fact, health insurance co-ops already exist throughout the country. And there is nothing currently stopping state or local governments from starting more of them tomorrow. Minneapolis has one with 660,000 members and the Group Health Cooperative in Seattle provides coverage for 10 percent of Washington State residents. So if they already exist how will adding one more co-op to the mix, not to mention the 1,300 or so private insurers already out there, increase competition? It clearly won’t. So why a national co-op, and why now?

With much of the Democratic leadership on record as favoring a single-payer system it just doesn’t pass the giggle test to assert that this isn’t yet another stone on the path towards a single-payer system. Senator Reid’s statement that “We’re going to have some type of public option, call it a ‘co-op’, call it what you want…” seems to indicate that co-ops are simply a rebranding of the public option that most Americans clearly don’t want. So let’s ask them to demonstrate that their real intent is to create a true co-op – even though they already exist – and not simply a “rose by any other name” public option.

It’s a simple test. If it walks like a duck and quacks like a duck, it’s probably a duck. A true co-op is owned and controlled by its members. They provide the investment, they pay the costs and receive the benefits, and they elect a board to oversee management, make rules, and provide governance. That waddles and quacks just fine.

Although it’s a moving target, the ‘co-op’ being considered by Congress wouldn’t look quite like this. Sen. Charles Schumer (D-NY) for example, makes it clear that the co-op’s officers and directors would be appointed by the president and Congress, and that Congress would set the rules under which it operates. Or it might be done by the Secretary of Health and Human Services. It would also receive a taxpayer-funded multi-billion dollar startup investment and subsidies for some undetermined time. Proponents say these would all be temporary, sort of like the post office, AMTRAK, Fannie-Mae and Freddie-Mac, and a whole bunch of other ‘temporary’ government-sponsored entities that are now doing just fine on their own. I’ll leave it for others to explain how this fits the definition of co-op and just point out that it looks pretty much identical to the public option that’s being jettisoned in the face of fierce grass roots opposition.

There are health system reform ideas out there that can pass with bipartisan majorities tomorrow if simply increasing access and decreasing costs are the real objectives. We can provide vouchers and tax credits that empower consumers to shop for the best policies rather than being tied to employer or government-based plans. We can reward healthy lifestyles, reform tort laws, reduce Medicare and Medicaid waste, and implement a host of other options that cost little and empower people rather than bureaucrats and politicians. Why not give those a try before turning a sixth of our economy and more of our freedoms over to the whims of special interests and their government enablers?



To schedule an interview with MPI President Carl Graham, please call 406.219.0508 or email

The Montana Policy is an independent nonpartisan policy research center based in Bozeman. It provides analysis and information to encourage individual freedom, personal responsibility, and market oriented policy solutions in Montana.


Montana Policy Institute

67 W Kagy Blvd, Ste. B

Bozeman, MT 59715