Common Sense?

A salesman at a car dealership in New York was gushing about the "Cash for Clunkers" program, under which the government will give $4,500 to those willing to trade in an older, less fuel efficient car for a new more fuel efficient car. He was quoted as saying, "It's a great stimulus package."

At face value it would appear as though the salesman's observation is spot on, as this program has certainly been a shot in the arm for the auto industry. But here is the dirty little secret: this money the government is giving away is borrowed. They don't have the money, they're printing it. It's money that you and I will have to pay back, with interest, in order to give some of our fellow citizens extra motivation to go buy a new car. Even though I myself cannot afford a new car my government finds it perfectly acceptable to add to my debt by lending my future money to someone else. For the politician the best part is a whole slew of people like our salesman will give them all the credit in the world for doing so. Are we really that happy that our money keeps getting spent on our behalf? It reminds me of that scene in Animal House where Kevin Bacon is getting hit in the rump with a wooden stick, and after every bruising slap he grunts "Thank you sir may I have another?"

Since when did borrowing money to grow the economy seem to make sense? Oh, yes, I remember. The Stimulus package. The problem with programs like this is that the best possible outcome is that the economic downturn slows or stops. But even in that best case we'll emerge with even more debt. Strange, but that doesn't seem like progress to me.

Here's what I would have suggested: every time you buy a new car you pay sales tax on your purchase. If the government would provide a holiday from that tax it could have the same stimulating effect on the industry without the negative effect of adding to our debt. As it is if you buy a $25,000 car you'd pay about $1500 in taxes with a 6% sales tax rate. Not as much money as in the "Cash for Clunkers" program, but it would have been worth a shot before adding to our debt even more.

Unfortunately for us, the current mindset in this country doesn't permit for such thinking. Being financially conservative would require more restraint on consumer spending, less grandiose promising on the part of our politicians and would contrast too much with our rising deficit. Until we change our way of thinking we'll continue to find ourselves being fooled into thinking that programs like this are good for our country and unable to see them for what they are: vehicles for our politicians to gain support and power.