Government rolls out still another clunker

"The teachable moment came at midnight Thursday when the government decided to suspend the less-than-four-weeks-old Cash for Clunkers program. Congress scheduled it to last until November. But many more car owners than predicted walked into dealers to qualify for the $3,500 or $4,500 rebates for trading in their old cars for new ones with slightly (four miles per gallon) better gas mileage.

Mind you, the government hasn't yet shelled out the $1 billion authorized for Cash for Clunkers. Dealers reduce the buyers' prices and have to apply to the National Highway Traffic Safety Administration for the rebates and NHTSA -- surprise, surprise -- has only managed to process 23,000 of an estimated 250,000 applications. The checks, we are told, will be in the mail. Oh, there's another problem: The dealers are required to destroy the clunkers, which will reduce the supply and increase the price of spare parts for those low-income folks who can't afford to trade their clunkers in even with a $4,500 subsidy. So much for helping the poor.

Cash for Clunkers is a prime example of the unanticipated consequences of hastily drafted legislation. The House voted hurriedly Friday to transfer $2 billion of stimulus funds to Cash for Clunkers, and the Senate will probably agree next week. But who thinks Congress will stop there? There will still be plenty of clunkers on the road.

This brings to mind a similarly well-intentioned 2000 Arizona law that paid $22,000 per vehicle to owners of cars operable with alternative fuels. SUV owners began installing small propane tanks and pocketing the money; the law didn't say they actually had to use the propane. A program estimated to cost $5 million ballooned to $500 million, one-tenth the state budget. The Arizona legislature, unable to print money, repealed the law. Congress is not similarly constrained."