Commentary: ‘Cash for Clunkers’ was de facto taking of property

Listen to this article

The Cash for Clunkers program has come and gone, and like most, if not all, government interferences in the market, its primary effect has been to transfer wealth from the poor and powerless to the wealthy and influential.

Consider its effect on a friend of mine, a young woman who, like most young people, doesn’t have a lot of money. One day at work, Seneca’s car was totaled by an elderly woman who hit the accelerator in the parking lot instead of the brake. Her insurance company gave her a check for $3,900, which she took to find a replacement.

The car lots were full of perfectly good used cars which would have met her needs and wants perfectly. However, they were all cars which wealthy people had traded in for a new car and a $4,500 subsidy from taxpayers who can’t afford new cars, like Seneca.

Thus, none of those cars were available for purchase; they were all earmarked to be destroyed.

With the supply of used cars vastly diminished, the price of those few available obviously far exceeds their value.

So Seneca got a double hit: she wound up buying a car she doesn’t like, at an inflated price; and her taxes were used to benefit the wealthy who could afford new cars and the powerful and well-connected (United Auto Workers).

If this program is economically sound, one wonders why it isn’t used for housing. Tearing down perfectly good older homes to build new ones for the owners would certainly stimulate the powerful construction industry, and would placate the powerful environmental lobby, because the new homes would be more energy-efficient.

The reason the government hasn’t proposed this is that there would be no way to hide the monstrosity of it. Imagine apartment dwellers and the homeless standing on the street watching while the government tore down perfectly good houses. It would be too obscene for even the best public relations flak to rationalize as good economics.

Cars, on the other hand, can be destroyed well out of sight of the public. The folly of the program is visually apparent and viscerally anguishing only to a few like Seneca who happened to be shopping for a used car at the time.

She is in some ways like Suzette Kelo, the unfortunate homeowner in the infamous U.S. Supreme Court case, Kelo v. New London, 545 U.S. 469 (2005). Kelo’s home was taken not for a school or road or park, but to give it to the Pfizer Corporation.

Just as Kelo’s own property tax dollars were used to benefit Pfizer rather than the public, Seneca’s income tax dollars were used to benefit the UAW and people who could afford to buy a new car.

And just as Kelo had the property she treasured taken from her, the government added insult to injury by taking Seneca’s right to buy a decent used car at a reasonable price she could afford.

Unfortunately, the right to buy and sell goods at a mutually agreed price with another citizen is not a property right. Thus, there was no legally cognizable taking.

But in practice, like every other government interference with contract and property rights, the program operated as a de facto taking of Seneca’s property, not for public benefit but for others’ private financial benefit, without just compensation to her.