Ron Paul explains why the “Cash for Clunkers” program hurts the poor and harms the economy.
Ron Paul: Well, it looks like the economic crisis is over. Last week it was discovered in Washington that the “Cash for Clunkers” campaign worked. The program is been heralded as a fantastic success. It was so successful that after we spent one billion dollars the House rushed to give two more billion dollars and everybody is delighted that it’s going to stimulate the car industry.
But when you stop and think for a minute, it’s pretty absurd what is going on here. “Print up a lot of money, give it to a few people to buy a car and the numbers look better and therefore this is the way the economy is going to be taken care of and recovered.” But there are lot fallacies in this, obviously. This program when it was first voted on was meant to help people who had old cars and they were in the low income bracket to help them buy a new car.
It didn’t do anything of the kind. The poor people, the people with poor credit did not come to buy a car, they didn’t go through this process. As a matter of fact, this program is being paid for by the poor people, because they’re taking the clunkers off the highway. They’re deliberately hauling these in if they do end up in these car lots, they’re purposely destroyed which undermines the very market that the poor people depend on.
Not only that, the poor end up paying a bigger price for this than anybody else. Because there really is no money in the bank. We know that. They can’t tax anymore and the borrowing is more difficult than ever. So what do we do? Back to the old story again: lets just print up the money. Printing up money gives you inflation. Who suffers the most? The poor people who didn’t get to buy a car. Just like the poor people who we thought we were going to give all these new houses to with all these affirmative action programs. Guess who lost all their houses, guess who are suffering the most? It’s the poor and the low-middle income people. They are the ones who lost their jobs and suffer from the consequences.
But the really disturbing part about all this is that most people in Washington, at least those who voted quickly to put in another two billion dollars into this program, actually believe these are good programs. And they think they help the poor, they think they stimulate the economy, and it’s total foolishness.
I mean, if you had someone to come and propose, say there is a new business in town, and he needed customers. But he has a good savings account, enough to buffer himself over for awhile, and he takes money out of the savings account and goes out on the street and the passes out money. He says, “You can have this money from me if you come and spend it in my store.” And they do that and then he brings out the cash register and he says, “Wow, today I made a lot of money.”
This whole notion that government can stimulate the economy by doing this is just as absurd as that. So, we obviously still have a long way to go. And for right now, the markets and others are starting to feel a little bit better. But, quite frankly, I think we’re just digging a bigger hole for ourselves. Debt is increasing, government intervention is increasing, and there is no end in sight.
We still have the basic problems. Government is too big, they spend up too much money, they interfere too much in all our personal activities, overseas activities, our economic activities and they’re dependent on deficits, they’re dependent on regulations, they’re dependent on the Federal Reserve to keep printing money.
But I’m working on the assumption that time is running out, we are doing well and trying to expose the Fed for what they are really up to. But time is running short and I would anticipate in the next year or two people aren’t going to be cheering and saying “The only thing we need now is another Cash for Clunkers program. If it worked for cars, why can’t it work for everything else?” But truth will win out in the end, and I think this absurdity of last week and this argument that we just pass out cash and they buy cars is a help to the economy, is a complete fallacy.