Tuesday, August 4, 2009

Killer App for Clunkers

The Wall Street Journal reports on the boom in the market for sodium silicate, the chemical used to kill clunkers under the government's cash program. The chemical turns into liquid glass and solidifies all the moving parts of the car.

There seems to be a chorus line of support for this program (but for a good post, see here). But if you take 250,000 cars off the road who gets hurt? Must be the people who buy these cars, and they must be the poor. So if we take another 500,000 off (if the additional $2 billion is appropriated) then the price of used cars for the poorest households must rise. Hardly seems progressive to me.

Wouldn't it be better to give a subsidy for new car purchases financed by a gasoline tax? The latter deals with the environmental cost, the former is the subsidy to the auto industry which is the real intent of the program.

What happens when all the clunkers run out?

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