Gluskin-Sheff economist David Rosenberg has some harsh words about the Cash For Clunkers program in his daily letter:

We couldn't believe this when we saw this quote from the U.S. Transportation

Secretary (Ray Lahood) in yesterday's NYT (page B3) on the “Cash for Clunkers”

program: “There obviously is a real pent-up demand in America ... people love to

buy cars, and we've given them the incentive to do that. I think the last thing that

any politician wants to do is cut off the opportunity for somebody who's going to be

able to get a rebate from the government to buy a new vehicle.”



Are you kidding me? If there is pent-up demand for autos why do we need a

rebate? If there are 20% more vehicles than there are licensed drivers, why

the need to perpetuate this cycle of overspending? Why is it a politician's job

to create incentives to spend? Shouldn't they be focusing their attention on

health, education, defense, infrastructure, public safety, job skills and

productivity growth (and perhaps the youth unemployment rate of around

20%)? We're not exactly espousing an Ayn Rand libertarian view but at a time

when the deficit is running at 13% of GDP, at what point is enough? These

rebates are not manna from heaven — it’s a future tax liability to hasten a

decision that the auto buyer would have made in any event. This is fiscal

policy short-termism at its best (we say this as we read the article on page B5

of the NYT — $2 Billion in Grants to Bolster U.S. Manufacturing of Parts for

Electric Cars).

As a sign of how distortions are created when the visible arm of government

intervenes and chooses to subsidize a form of spending, see Clunkers Plan

Deflates Mechanics on page A4 of the WSJ.



