One of the biggest differences between conservatives and their liberal/progressive counterparts is their view of government programs. Blue voters love government programs, especially ones that throw money at solutions looking for a problem.

Like President Obama’s 2009 Cash for Clunkers. Intended to be a stimulus for new car sales during the Great Recession, with the side benefit of reducing vehicle emissions. How so? Consumers could trade in their old, less fuel-efficient vehicles (so-called "clunkers" ) for a rebate toward the purchase or lease of a new, more fuel-efficient car or truck.

The traded-in vehicle had to be:
• Less than 25 years old
• In drivable condition
• Have an EPA-rated fuel efficiency of less than 18 miles per gallon

The new vehicle had to meet higher fuel efficiency standards, with the specific requirements and rebate amounts varying by vehicle type:
• For cars: The new vehicle needed at least 22 mpg for a $3,500 credit, or 28 mpg for a $4,500 credit.
• For trucks: The new truck had to have at least 18 mpg, with the rebate amount depending on how much higher the new vehicle’s mpg relative to the trade-in

The program was popular. Initially 1 billion dollars was allocated, which had to be increased to 3 billion by Congress. Over 650,000 cars were traded in for the clunker credit.

Win/win for everyone, right? Umm, not so much. First, the environmental impact was negligible. 650,000 cars is a lot in a vacuum, but an insignificant percentage of the total cars on the road. How about stimulating the economy? Again, big whoop. At best, it was a short-term bump followed by a steep decline after the program ended. The pull-forward effect. Also, only 49% of the new cars purchased were domestic. Good call Congress, not specifying American made cars. The majority went to foreign manufacturers.

But far worse was the long-term impact. Here, the Law of Unintended Consequences comes to the fore, as it so often does. You see, the government, in its infinite wisdom, mandated these traded in cars be scrapped. And not traditional scrapping where salvaging for parts takes place. No, the engines were removed and rendered unusable by replacing the engine oil with sodium silicate, “liquid glass,” and then running the engine until the solution solidified and the engine seized up. Then the rest of the car had to be shredded. Now these cars were not push, pull, or tow junkers about to die on their own. They had to be in running condition. So over 650,000 functioning and inexpensive used cars were taken off the market completely without even their parts available to repair other such vehicles. The net effect was to destroy the cheap used car market and force a cycle of purchases beyond the means of those least able to afford the costs associated with new cars.

To elaborate, I will use my example. While I was working two jobs for years to support my family, we needed to have two cars. Both were always second hand vehicles. One in good running condition for my wife and kids. And a work car for me that was a “beater.” Beaters rank below clunkers. I would buy a car for under $1,000 and drive back and forth to work until it died. At which point, I would donate it to one of the charities that would tow it away and buy another. We repeated this cycle for years. If these cheap cars weren't available, I could not have afforded to own two cars. But the Obama program removed a huge amount of both categories from the market. Bottom line, this unneeded solution was nothing more than a wealth transfer to automobile manufacturers.

In short, proving once again that the government that governs best, governs least.

EDIT
I got the idea for this post from the replies to a thread by a Gen Z woman about how the costs associated with car ownership are hurting their generation nearly as much as housing. When some replies asked why no one bought cheap used cars anymore, another reply referenced this Act as the reason for the unavailability of such. So I used perplexity.ai to validate the claims, and here we are. It is indeed an excellent argument.

Here's another. New car sales spiked during the latter part of Covid as the stimulus checks were used as down payments. A Federal Reserve study revealed that the stimulus checks boosted new cart sales in 2020 by 1.25 million units, about 12% of sales that year. This was at a time when inventory was already limited by the computer chip shortages. So prices were high, often thousands above sticker price due to supply and demand.

What happens when you pay too much for a new car with a two or three thousand dollar down payment? You get forced to take a long loan, 6 or 7 years, at a high rate, if you want the car. It's now five years later. Typically American car buyers trade up at this point before the 5 year power train warranty expires, at which point value drops off sharply. But many of these loans are still under water, the current trade in value being less than what is still owed on the car. Your only recourse is to roll it into a new car loan that will increase your indebtedness. And be even harder to get out of in another five year. That's if the finance companies will even allow it.

As a result, some industry analyst are predicting a crash in the auto markets later this year. They point to repossessions being up and auction lots bloated with inventory of cars that are five years old or less. Add the prospective trade-in sales being refused by the finance companies and we have a classic glut.

The Law of Unintended Consequences remains undefeated.