News reports indicate that the federal government is winding up “Cash for Clunkers” early next week on the expectation that claims will exhaust the $3 billion committed to the program. Just noticed this comment by Robert Barro of two weeks back (HT to Paul Walker/Anti-Dismal):
The most ludicrous (though, fortunately, small) intervention thus far has to be the cash-for-clunkers program. It’s not surprising that subsidising people to destroy old cars would raise GDP, because measured GDP includes the replacement cars but not the value lost from destruction. Why not also blow up houses and factories and then enjoy the expansion of GDP from the replacement investment? (Actually, it’s best cosmetically to blow up refrigerators and other consumer durables because GDP does include rental income on houses and factories.)
ADDENDUM: Chris Edwards nominates “Cash for Clunkers” as the dumbest government program ever. While it makes a tempting target, I’ll note that the “Economic Analysis of Scrappage” article I cited last week reports on a 1990 analysis of a “cash for clunkers” program that compares it to Corporate Average Fuel Economy (CAFE) regulations. The result (and I’m paraphrasing just a bit here): CAFE is much dumber.