05.15.2009 11:07 am
Why a clunker credit is bad for the poor
St. Louis Post-Dispatch
The Financial Times’ Lex column makes a good point today about the “cash for clunkers” bill making its way through the U.S. Congress: Not only is the bill unsound environmentally, it’s also bad for the poor. Here’s Lex’s take:
The new plan is also economically regressive. By requiring cars to be scrapped, vehicles typically used by working poor in a country with patchy public transportation would vanish or rise in price. Important spare parts could not be recycled, making repairs of old vehicles already owned more expensive for the poor.
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David Nicklaus has covered St. Louis business for more than 25 years. His column appears three days a week on the Post-Dispatch business page. 
I think that it is fair to assume that the bill would raise the price of “clunkers” by increasing the demand for them. People who chose to sell them would therefore have more money with which to either buy a slightly better car, or substantially more of something else.
Of course, in a world where there is no such thing as a free lunch, somebody would have to pay for this plan, and the “somebody” would be all other taxpayers. I would really prefer to help low income people (many of whom don’t own cars at all) by reducing taxes that are the most regressive, such as sales taxes and (gasp) taxes on corporate profits. But I don’t see how a program of buying up clunkers would be “regressive.”
Incidentally, it would be good for the taxpayers as well as for people who continued to own older cars for useable components of the “clunkers” to be salvaged for re-sale before the bulk of the vehicles were scrapped. That would cause the price of used parts to drop.
Let them eat cake. Give me my $4500.00