Cash for Clunkers: A Cautionary Tale for Healthcare Reform

by: John Dalt

“Cash for clunkers” is a great example why the government is not capable of running the health care system. The clunker program offers up to $4500 for your low gas mileage, less-than-25-year-old car.

When you trade in your gas-guzzler the dealer advances the $4500 credit, destroys the car, and bills the government. This is where the wheels come off the program. One dealer said it took five hours to fill out the paperwork for one clunker. Truth number one: Government runs on paperwork. So much for streamlining health care claims processing, and squeezing all those legendary “inefficiencies” out of the claims process.

The “cash for clunkers” program was funded with $1 billion and projected to run until November 1. After one week, they are out of money. This teaches us that the government has no idea what anything is going to cost; they guess.

The “cash for clunkers” program was designed to take gas-guzzlers off the road and replace them with fuel-efficient cars that would help reduce gasoline consumption. The problem was that most of the fuel-efficient cars are built by foreign manufacturers.

The biggest winners will be foreign manufacturers. Same with national health care. Chronically uninsured American Citizens count about 9 million, less than 3.3% of U.S. population. The uninsured rate for illegal aliens is almost the reverse. According to the Pew Hispanic Center, illegal aliens counted 11.9 million in October 2008.

The primary purpose of “cash for clunkers” was fuel mileage. The truth is, not really. You can qualify for a rebate by trading in a pickup that gets 17 miles per gallon for a car that gets 21 miles per gallon. That is going to make all the difference in the world. If you want a Crown Victoria, it automatically qualifies you for $4500, plus, your kids won’t ride with you anymore.

If you would like more information, here is the government website, “Cash for Clunkers.”

One last observation on the “cash for clunkers” program. What economist believes destroying property is a good thing? Every “clunker” traded in has to be destroyed. Removing products from the market while they still have economic life destroys value, thus a drag on the economy. This program is counter-productive. We borrow money to destroy value! If this made sense, why didn’t we level every foreclosed home in the U.S.?

Disclosure: No Position