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


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