For years I have criticized the government for its interference in the auto manufacturing business, from the ill-conceived café standards, the expediting of electric cars, the cash for clunkers program, and of course the auto bailout. And, I have not forgotten CEO’s who became weak-kneed under big government pressure, put aside the free enterprise system and bowed to corporate welfare.
Two recent announcements appear to support my position. On the heels of a study that labelled the Cash for Clunkers program a failure, comes a report that Cadillac can’t keep up with demand for its gas-guzzling Escalades, news that is sure to shake up environmentalists.
A National Bureau of Economic Research working paper has revealed facts that the $3 billion, yes billion, two-month government Cash for Clunkers program subtracted between $2.6 and $4 billion from the auto industry. The program offered $4,500 if people turned in their old cars for destruction and bought a new car.
You will recall that goals were to lift manufacturers during the recession by subsidizing sales, while mollifying “greenies” by putting more fuel-efficient cars on the road. The report from a group of Texas A&M economists, shows that the subsidy didn‘t really create any extra auto business since those who participated were likely to purchase a car during that period anyway, and any environmental benefits couldn’t be justified. Continue reading