Why “Cash for Clunkers” Hurts The Poor

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.


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  • L

    This program is more about the Green Agenda than helping people, in my opinion. Yes, some cars moved off the lots, and that’s a good thing. But it’s just moving money from one pocket to another. It’s not building car sales for the future of the industry. It’s not producing anything. I believe we need to drill and use our own oil. That will produce something. That will save us billions. If the global temperature goes down on its own, which is shows signs of doing, than we don’t have to worry about “carbon emissions” to the point of ruining our country. China and India have no intention of curbing their oil use, so regardless of what we do there are going to be plenty of carbon emissions. Why impoverish ourselves?

    • christine

      It’s never for the reason they say it is. They’re always working on their agenda. It’s AGAINST us, not FOR us. Notice…they’re not listening, just going ahead and doing whatever they want to do that fits their agenda, staying the course until they get what they want.

      My hope is that they have an unexpected consequence that works in our favor, something that’s bigger than them, bigger than all of us, that they cannot control, but who will set them straight and keep us all protected from any more harm they wish to do to us, to anyone around the world.

  • VR
  • Blackie_Chan

    You continually gloss over the fact that your retorhic only stands somewhat true if all goods are held in equal value. If my production of a straw is as good as yours, then yes I will import yours in if the total cost is cheaper than my total cost. But again, you are missing the whole concept in Adam Smith’s “Wealth of Nations” that a community (local, regional or global) is benefitted when people specialize.

    Industries may very well crumble because a country can do it the same cheaper, however that same industry may innovate and make a new product which serves the market and increase exports because there is no competition. Nessecity is the mother of invention, and the US in general has always been an innovative nation. That is our worldwide capital, innovative products that the worldwide market wants. Who cares if the US no longer produces transistors if they make the best electronics that uses global transistors that make more margin and revenues.

    The point of a free market is to innovate to find niche markets which are profitable on a local, regional, and global market. Those that can do it better, faster, cheaper win and others lose. Protectionism and changing the money value, supply and intrest rates all throw in variable which are artificially proping up markets which need to evolve to be healthy (by innovating or dying out from being non-productive).

    Blame the lobbyists, PACs and politicians for distorting our free market in a way that they view as being cheaper than remaining agile and nimble. Remember Corporations are bureaucracies which instead of remaining adaptable look to make more bureaucracies that support them.

  • Herewe Goagain

    Another $14,000,000,000.00 in Treasuries purchased by the FED in the last two days, purchased with money made out of thin air and exchanged for the sovereign debt of the USA.

    • Nate Y

      Yay!!! That’ll eventually devalue the currency!!! Prosperity here we come!

  • longshotlouie

    ‘Myths, Lies, and Downright Stupidity’

  • Don’t bring oil money into this.

    So the US starts using less oil. Guess what OPEC does? Cuts production! King Abdullah or whatever over there wants to stay rich. Eventually, they’ll say there is an oil shortage so prices will shoot skyhigh. Sure, you get 33 MPG, but now you could be paying $10/gal or more.

    Supply and demand my friend. The Saudis aren’t going to be willing to go broke for us.

    • Sean

      No, that oil can go towards other countries. There is a forever growing demand.

  • VR

    The Obama administration is refusing to quickly release government records on its “cash-for-clunkers” rebate program that would substantiate — or undercut — White House claims of the program’s success, even as the president presses the Senate for a quick vote for $2 billion to boost car sales.

    The Transportation Department said it will provide the data as soon as possible but did not specify a time frame or promise release of the data before the Senate votes whether to spend $2 billion more on the program.

  • Nate Y

    Cash for Clunkers is just another manifestation of The Broken Window Fallacy.

    • longshotlouie

      EXACTLY, and they are busy breaking windows as fast as they can.

      Ignorant Traitorous Marxist Bastards

      • Sean

        This isn’t about the broken window theory in any way. It’s about oil, and our growing addiction.

        • longshotlouie

          Sir Ignorant Traitorous Marxist Bastard Sean, please explain to the viewers why this is not about the Broken Window Theory.

          (hold on, I’ve got to stop laughing before you post)

          • Sean

            This has nothing to do with creating wealth, or destroying wealth. It’s about oil and our addiction. Maybe your stupid enough to think we can import 500 billion dollars worth of oil a year.


            That’s destroying wealth.

          • Nate Y

            You see Freedom Watch this week? Pretty kick ass show. Anyway, Peter Schiff is on there talking about Cash for Clunkers and basically says everything we in thread are saying regarding the program’s stupidity and immorality. He mentions the Broken Window Fallacy, how Cash for Clunkers hurts poor people (enocourages them to destroy an owned asset and go into debt), how the program destroys wealth, he even brings up Henry Hazlitt and Economics in One Lesson. Highly recommended.

            Doesn’t it feel gratifying to be in such good company?

          • Sean

            That’s their own choice. If people should want to go into debt than they should have the free will to.

            Most people were going to buy a car anyways.

            I think bill maher is a way more kick ass show.

          • longshotlouie

            I never miss it, Nate. That and the Happy Hour show are the only reasons to watch Faux News.

        • Nate Y

          I wasn’t replying to your nonsense. I was asking longshotlouie. I have no trouble believing you think Real Time is a better show. Bill Maher constantly misidentifies the problems and solutions.

          I won’t take the time to explain the common sense errors in your post.

          Perhaps you would be fond of other government programs similar to Cash for Clunkers.

          Cash for Clothes

          Cash for Houses

          Cash for Appliances

          Cash for Shoes

          Cash for Furniture

          Cash for Food

          Cash for X

          A lot of industries are hurting. Where are their government programs? There is nothing special about the car industry.

          • Sean

            Let me quote myself from this post..

            It’s not about the car industry hurting. “It’s about oil, and our growing addiction.”

          • longshotlouie

            We only have an addiction to foreign oil.
            Sound money makes oil, and just about everthing else, cheaper.

            Here, let Uncle America school ya.

          • Sean

            Ya sound money would make foreign goods cheaper encouraging more spending, and also it would make our goods more expensive for other countries to purchase, they would take their business elsewhere.

            Alan Greenspan Claims that war is for oil.

          • longshotlouie

            Another large hole in your bucket, Sir Sean.

            Since the exports would be manufactured at lower costs it would more than make up for the currency difference.

            Sound money and competition = Lower prices for all

          • Sean

            =more spending+less exports. It balances itself out.

          • longshotlouie

            Less exports?

          • Christine

            Sean, the ones who have an addiction to oil are the elite for world control. They instigate wars over it. They invest in oil stock. They invest in weapon sales. They destablize countries, then go in and try to sound like the Saviors, but first they take their oil and wealth in secret, just like they did Iraq.

            The Best Testimony of the 21st Century

            Not only did Iraqis die, they continue to and so do Americans and Britians…for the additions of the elite and their game of world domination using the rest of humanity. They are totally insane junkies.

          • Sean

            Ya, if our dollar was worth more, it would make our goods more expensive and it would be harder to compete in the world market. We would end up exporting a lot less.

            We are addicted to oil. The elite feed off of our addiction.

          • longshotlouie

            Ignoring the fact that you are unable to articulate why you believe this to be true (other than that is what your professor told you), are you suggesting that the only alternative is continued devalution of the dollar?

            No Sean, WE are not addicted to oil. Extremely amusing to hear elitists blame ‘customers’ for the problem.
            Your oil strawman is dead.


          • sean

            “The advantages of a weak dollar, are that American made and grown goods and foods, are cheaper for foreign nations to purchase, so it helps our exports and trade deficit, which currently are literally out of control. US manufacturers, who export things, love weak dollars, and foreign nations who sell us stuff, hate weak dollars, because it makes their goods too expensive for Americans to buy. Get it so far?” -Don Stott

            Yes we are addicted to oil. I would like to see you go a week without riding in a car.. Oh wait, you probably don’t go anywhere anyways, you probably sit on your ass 24/7.

          • Herewe Goagain

            Got It, so you support continued devaluing of our currency.

            compulsive need for and use of a habit-forming substance (as heroin, nicotine, or alcohol) characterized by tolerance and by well-defined physiological symptoms upon withdrawal; broadly : persistent compulsive use of a substance known by the user to be harmful.

            1 : having power to compel
            2 : of, relating to, caused by, or suggestive of psychological compulsion or obsession

            Your fear mongering continues to employ abuse of the English language.

            For close to 100 years we have listened to this from people like you. One thing is still true after all these years, you continue to be wrong.

          • longshotlouie

            Nice, HG

            I’ll just enjoy my lunch while you handle troll patrol.

          • sean

            Addiction is a dependence on a behavior or sub-stance that a person is powerless to stop. The term has been partially replaced by the word dependence for substance abuse. Addiction has been extended, however, to include mood-altering behaviors or activities. Some researchers speak of two types of addictions: substance addictions (for example, alcoholism, drug abuse, and smoking); and process addictions (for example, gambling, spending, shopping, eating, and sexual activity). There is a growing recognition that many addicts, such as polydrug abusers, are addicted to more than one sub-stance or process.

          • Herewe Goagain

            Which has nothing to do with oil.

          • sean

            Dependence- the state of relying on something in order to be able to survive or operate properly

          • sean

            “we are addicted to oil the same way we are addicted to air.”

          • Nate Y

            Currency devaluation is just another short term fix which, in the long run, is exposed as no fix at all.

            Problem: We have a trade deficit

            Keynesian (wrong) solution: Debase your currency. You can rattle off a bunch of lies and half truths to make people believe this is the solution. You can say “The advantages of a weak dollar, are that American made and grown goods and foods, are cheaper for foreign nations to purchase, so it helps our exports and trade deficit, which currently are literally out of control. US manufacturers, who export things, love weak dollars, and foreign nations who sell us stuff, hate weak dollars, because it makes their goods too expensive for Americans to buy. Get it so far?”
            I know, smart people and those who understand real (Austrian) economics will point out that a weaker dollar (by definition) makes EVERYTHING more expensive for Americans in general. They’ll also point out the other negative consequences of currency devaluation which we choose not to mention. But don’t fret. Just keep beating the “It’s good for exports” drum. The people will eventually start dancing to it.

            Austrian (real) solution: You have a trade deficit? Better find a way to encourage domestic production. Why? because imports are ultimately paid for with exports. Don’t try subsidizing industries and/or devaluing your currency. That’ll only serve to enrich a few people at the expense of the many. It could feel good for a little but in the long run it’ll bite you in the ass. Nations grow wealthy through production, not currency devaluation. Do the right thing and let the market work.

          • Herewe Goagain

            You never let us down. One idiotic statement after another. And you have no shame in raping the language for your Marxist ideology.

          • sean

            Okay.. Bottom line is that a strong currency would not fix our trade deficit because we would lose exports.

            You are correct that weakening the dollar is not the answer to fixing the trade deficit. We should find a better way to encourage domestic production.

            Herewe goagain- You don’t need a physical dependency to be addicted to something. But in a round about way we are physically dependent on oil. We need oil to grow crops and food. We need oil so that we can get to our jobs so we can provide a home and shelter..

            Addiction- The state of being addicted.
            Addict- : to devote or surrender (oneself) to something habitually or obsessively.

            Well we habitually purchase gas.
            habitual- resorted to on a regular basis

          • sean

            From 1992 to 2002 both the value of the dollar and the trade deficit rose substancially.

          • longshotlouie

            yepper, I’m addicted to clothing.

            Just saying that we would lose exports does not make it so.

          • longshotlouie

            Can you say ‘bubbles’?

          • sean

            Bubbles aren’t the cause of our trade deficit. If anything the strong dollar in the nineties ruined it for us. It promoted more imports and less exports. It along with free trade policies destroyed our manufactoring base by making it cheaper to produce elsewhere.. Production attracts wealth.

          • Nate Y

            $1.00 in 1992 had about the same buying power as $1.28 in 2002.
            Annual inflation over this period was about 2.51%.


            Keep in mind, this loss of purchasing power is using the government’s bogus CPI figures. Since I have a healthy distrust of government statistics, I’d bet the dollar lost more purchasing power in during that 10 year span.

          • sean
          • sean

            You do know what the dollar index is don’t u?

          • sean

            Well i’m off to catch a plane, you people have a wonderful week!

          • longshotlouie

            Hopefully you’ll be better at answering a direct question at the airport than you are here.

          • Nate Y

            Yes I know what the dollar index is. It measures the value of the dollar against a basket of OTHER CURRENCIES. While that is worthy of note, it is not too important in the lives of everyday Americans. What matters to them is what their dollars buy when they go to the grocery store, pay their bills, etc. A dollar bought you more (in those terms) in 1992 than a dollar bought in 2002.

  • longshotlouie

    No, this program was definitely not designed for the poor.
    More money printed, more inflation. This hurts the poor and fixed income folks worse than the rest.

    Instead of refurbishing these vehicles to make affordable transportation for many, they are destroyed. Tens of thousands are taking on more debt, and the taxpayers are on the hook for another $3,000,000,000.00.

    We now have the government in the businesses of banking, auto, health, and finance. That’s a big slice of pie for an entity that has historically only successfully produced debt and war.

    Marxism is in a full tilt boogie right here in the good ol’ USA.

    • Sean

      Somehow they have to slow down our oil addiction

      • Allan

        That’s easy, just raise the gas tax. We use the tax $ to inprove transportation (less congestion, mass transit, etc – thereby lowering consumption), and get people moving toward more efficient cars.

  • Sean

    This program doesn’t hurt the poor and was not designed for the poor. This program is a tax incentive. Only people who pay taxes can afford a new car and this is a chance for them to get a little bit back as a tax credit, while helping the hurt auto industry. The poor doesn’t pay income taxes, so it wont come out of their pockets.

    What will it do? It will help the cut wound where we are losing blood or money for oil. That 3 billion dollar will save our country 10’s of billions of dollars if not hundreds, by just improving our gas mileage.

    • Sean

      He could of just regulated carbon emissions or gas consumption which would force people to buy new cars. Instead he gave them tax incentives to do it on their own.

  • Lancelot

    Cash for clunkers why would poor people be better off buying expensive new cars that will put them in debt for a couple years. Poor crappy cars are for people who gotta squeeze by, i am one of those people i have a nice 500 dollar car and i will make it last just as long as my sisters brand new car. Ron Paul has make a video for every issue though up by man because all i heard was cash for a crappy car and i was like thats not such a bad idea basically Ron has away of showing a different point of view. Does anybody notice the irregularity in Mr Pauls eyebrows ????

  • longshotlouie

    The Real Economy Versus the Make-Believe World of the Government and Financial Giants


  • longshotlouie