Saturday, August 8, 2009

Cash for Clunkers for housing?

The Senate has added another $2 billion to the Cash for Clunkers program. This is in addition to the original $1 billion allocated to the program. In all, that's enough to subsidize the purchase of about 750,000 new cars. The program was originally supposed to run through November, but consumers jumped on the deal and even with the new money, it will probably be done within a week or so.

A major component of the program is that the cars traded in to qualify for the rebate must be destroyed. This takes used cars off the road and is allegedly good for the environment (although I don't know if building an entirely new car uses less energy than just keeping your old one). If this program is deemed a success, why not apply it in other areas?

In the housing market, we could reduce inventories and increase energy efficiency by offering a $20,000 rebate on the purchase of a new house when you agree to have your current home destroyed. It would be the end of the housing glut right? One could also apply it to electronics. Smash your old TV, get $100 off a new one. This could be the silver bullet we've been looking for. To get out of an economic downturn, all the government has to do is pay people to destroy their stuff and buy new stuff! It could be applied to services as well. Throw some mud on your car and the government will give you a voucher toward a car wash. Bring a steak to a restaurant and get a voucher toward a meal, providing the steak is destroyed. Show proof that you've destroyed an mp3 file and get half off your next song purchase. Divorce your spouse and get $3,000 toward your next wedding.

This does more than create economic activity. It allows the government to determine which economic activity to create. Instead of individuals running around allocating resources all willy nilly, the much more intelligent and wise experts in Washington D.C. can ensure that you're spending your money on what's best for society as a whole and not just wasting it on yourself and your family.

Sure it will be expensive, but with the government's new policy of actually printing on both sides of paper, the raw materials cost of printing more money should come down. No problem there. Crank up the presses!

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