Is 'cash for clunkers' really helping?

How is "cash for clunkers" benefitting our economy?

Sure, people are spending money on new cars and getting their old gas-guzzlers off the road. This move certainly can help make our country become slightly less dependent on foreign energy imports. In addition, automakers are selling their products, and that can't be a bad thing, right?

Wrong. People are buying new cars only because the government is paying them to do so. Once the money first ran out, people stopped buying new cars. So, what did Congress do? They appropriated more money to keep it going. What will they do once this latest $2 billion runs out?

Moreover, what cars are people buying? The program provides the greatest rewards for buying the most fuel-efficient cars. That's great, but what carmakers produce the most fuel-efficient cars? I'll give you a hint: It's not Detroit. U.S. automakers build just four of the top 10 most purchased car models under this program, and two of those are Fords.

Yes, the cash for clunkers program is causing Americans to buy cars, but it's causing them to buy the wrong cars. American automakers aren't benefiting from this program; Japanese automakers are. The program is creating an artificial bubble of prosperity in the auto industry similar to the artificial bubble in the home mortgage market that caused the current economic downturn. When the government money runs out, the American new car market will collapse faster than it surged, and we'll be right back where we were at the end of 2008.

If Congress throws more money down this potentially bottomless pit, real recovery could be delayed even longer. If they don't keep pouring money into the program, the U.S. auto industry recovery will take too long, and American taxpayers will have to foot the bill again to keep Detroit going. First, though, American automakers need to once again take a lesson from their Japanese counterparts and start making fuel-efficient cars that people want to buy.

Daniel Moore, Grovetown

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