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October 21st, 2009 10:53 am
Cash-for-Clunkers Could Be Money-for-Make-Work

The last sentence on Pennsylvania Senator Arlen Specter’s entry on The Huffington Post says it all:

We could all take a lesson from FDR.”

And what, pray tell, might that lesson be? Apparently, that it is the government’s job to put people back to work when the private sector can’t. The key to the Specter Plan is creating an indirect subsidy to out-of-work people via cash incentives to employers for hiring more workers. For example:

A tax credit to encourage employers to create new jobs or extend hours worked is just the kind of direct subsidy that worked so well with the cash-for-clunkers program. That was about cars. This is about jobs and people, an unquestionable priority. The moral imperative to act is aggressively clear.”

Astute readers will notice a disagreement between this author and the Gentleman from Pennsylvania about whether paying one party in order to benefit third party is a “direct” or “indirect” subsidy. Logic would seem to dictate that if one wants to help someone pay his bills, the most efficient way to do so is to skip the go-between and give the man some money. If people need help now – and many do – why not send them a check that covers the cost of bills and requires the recipient to get relevant job training? In today’s credential-crazed economy, the time and money spent earning a Microsoft Office certificate or sales license would go a lot further in landing a job than bribing employers to hire people they can’t otherwise afford.

And what about the alleged success of the cash-for clunkers program? The long-term effects of the program reduced the number of used cars thus driving up the price of those that remained. This FDR-style intrusion into the market decreased the sales of used car dealers and put car purchases out of reach for the poorest families. Now, Specter wants to spend more taxpayer money on jobs that cannot be sustained without subsidies. There may be a moral imperative to act. But like health care reform and the bank bailouts, the only worthwhile government acts are those that get the private sector moving away from the public’s money as fast as possible.

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