That Washington is shocked by the news that Americans like getting free money shows how thick the Beltway bubble really is.
Like the drunk who only looks for his car keys where the light is good, Washington can only see the economic activity it has created, not the activity it has destroyed.
For starters, who says the smartest thing for people with working cars is to buy new ones? Personal debt is supposed to be a problem, so why not look at this as bribing consumers into taking out car loans they don't need? Even with the $4,500 subsidy, not all of these customers are going to be paying cash for their new cars. So they'll be swapping serviceable-but-paid-for cars for nicer cars that are owned by banks.
Besides, maybe some people would be smarter to buy a savings bond or max out their kid's college fund or -- here's a crazy thought -- buy health insurance. But instead they've been seduced into spending the equivalent of their six francs on a car they don't really need.
But, you might say, some buyers surely do need a new car. True. But if they needed a new car, they'd get one anyway, eventually. Indeed, they might already have gotten it, but rationally opted to wait for the program to kick in.
Or maybe they'd have needed to delay the purchase until next year, or buy a cheaper car, possibly even a used car, which will now become more difficult for poor people to find because we are taking all these cheap cars off the market.
But at least under these scenarios, they'd be spending their own money.
Under the government's program, tax dollars are being diverted to people with cheap cars so they can buy expensive ones. That's just really inefficient wealth distribution, not wealth creation. But government can see it, and that's all that counts.
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