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Jon Stewart Only Sees The Bridge Being Built, Republicans Display Their Ignorance

August 04, 2009 – Comments (6)

A lethal combination

I'm a big fan of Jon Stewart, but that doesn't make him infallible.  In a recent attack on Fox News he correctly pointed out that Fox engages in what he derisively calls the Crank Cycle.   Targeting Fox News for comedic value is an endeavor I will always wholeheartedly support. 

Fox is off the mark

Fox News, as is typical, misses the point.  According to the empty suits at Fox and in the Republican Party, the criticism is two fold: the program is poorly run and an example to be used to point out the problems with universal health care. Second the program was selected for the auto industry arbitrarily so there is nothing preventing the government for subsidizing other businesses.

The first argument is incredibly weak and a logical leap that is unsupported. It also hypocritical.  If the Republicans really opposed Universal Health Care they would also oppose other government interventions in the health care system, like George Bush's presciption drug bill and Congressional Mandated and Regulated Private Insurance (on a side note, private insurance in the health care industry does not function like insurance at all, so perhaps we should be honest about it. It's mandated coverage, not insurance.  There is a difference.)

On the second argument, Republicans act bewildered that the government would subsidize a business, and pay people to use that product.  This is high comedic irony.  Are they not aware of the thousands of government subsidies currently in existence?  The Republican Party engages in corporate welfarism that would make Obama blush.  From farming to manufacturing to banking, the Republican Party is always happy to step in and stimulate a business here or there at your expense.  At least the CFC program gets some people a car out of it the whole scam. 

Progressives fare no better

Unfortunately, Jon's premise that the Cash for Clunkers program is successful displays a woefully inadequate understanding of economics.  He is a comedy talk show host, so i won't hold that against him. I will continue to be a fan of his show.  What I will hold against him is the smug attitude of economic enlightenment so typical of the modern progressive.

Let's briefly review the details of the CFC program.  An individual owning a car that meets an arbitrary miles per gallon threshold and is within an arbitrary age range can swap that clunker at the local dealership for a new car that meets government mandated emission standards along with a $4500 rebate towards that purchase.  The parts of the clunker will then be stripped/destroyed so it may never pollute again. 

Winners and losers

Anyone who owns a clunker that is worth less than $4500 is a winner in the short run. They can trade in their car for a higher price than they would have received in the open market.  Auto makers also win.  This is no surprise.  With the government picking up the tab for the rebate (read: you), auto makers receive the windfall profits of an artificially created demand. 

The loser is everyone else.  Of course, we are told that we win, since the environment will be saved.  Ok.

Measuring the economic benefit of the CFC program, or any program for that matter, requires a long term approach.  Henry Hazlitt drives this lesson home in his example of the government bridge project. 

"We can see the men employed on the bridge. We can watch them at work. The employment argument of the government spenders becomes vivid, and probably for most people convincing. But there are other things that we do not see, because, alas, they have never been permitted to come into existence. They are the jobs destroyed by the $10 million taken from the taxpayers. All that has happened, at best, is that there has been a diversion of job.  More bridge builders; fewer automobile workers, television technicians, clothing workers, farmers because of the project." - Henry Hazlitt, Economics in One Lesson

Returning our attention to the CFC program, we can see the rise in auto sales.  The argument of the progressive party is vivid.  "Look at all those new cars being purchased," they exclaim!  However, that money has to come from somewhere.  It has to come out of the pockets of working Americans that will pick up the tab for the multi billion dollar program.  That means that jobs have been destroyed in other sectors of the economy.  We have more auto workers than we should, but fewer workers in other sectors.  Labor resources are now directed in a less efficient manner, meaning that the overall wealth of the nation just declined. This even excludes the cost of the bureaucracy that must be set up to oversee the program.

Cash For Clunkers doesn't kill anyone   

The CFC program is not the worst idea ever.  Setting up a global empire of 700 bases in 130 countries, invading Iraq, building democracy in Afghanistan... these policies are all way more stupid and costly.  Bailing out AIG, GM, Chrysler, and the fraudelent reserve banking system was also a lot worse.  At least some people are getting a new car here.

That doesn't make the policy brilliant however.  Perhaps in a room full of idiotic ideas in a Washington D.C. think tank, the CFC plan is brilliant by comparison.  Judging it against the Laws of Economics, it is yet another shifting of resources at best, and a foolish waste of money at worst.

Jon Stewart's haughty analsyis is short sighted and foolish.  He is a comedian.  The Republican Party's analsysis is riddled with hypocrisy and irrationality.  They are elected representatives.  Americans deserve better.

David in Qatar