Bailouts and "Cash for Clunkers"

Does this look like a clunker??!!!

One bailout after another... Why not bail out people who chose to buy a car that doesn't get great gas mileage and doesn't have a great resale value?! The government has its hand in everything else and has spent billions and billions over the last few months, so what's another billion or two? I'm pretty sure i'm not the only one that thinks I don't want my tax dollars subsidizing people who freely chose to buy a vehicle that isn't very fuel efficient. The last time I bought a car I made sure to get one that had good gas mileage. If I had chosen to buy one that didn't, why should anyone other than myself pay to get me another car?

A few years ago I bought a 1995 Honda Civic for $2,000. That thing got between 35-40 mpg. Why do these people with "clunkers" have the cars they do? Because they chose to! Many of the cars eligible for the "cash for clunkers" have a resale value higher than $2,000 and chances are, when they bought it they probably spent a whole lot more than its current resale value. The option was clearly there to get a better vehicle.

So once again, the government bails out people who made poor choices. If money is being given out, why not give it to the people who buy quality cars with good gas mileage and higher resale value? Give them a couple grand for making wise decisions and maybe it will influence others to do the same in the future. If you had the money to buy a new car, isn't it already that much more appealing to buy a hybrid when you know that you can get a tax credit?

The government always has its incentives backwards. For several years banks made mortgage loans to people who could not afford them. They packaged them up in very appealing ways with ARM's, Option ARM's, and interest only loans. Lending standards were loosened tremendously. After the 3 or 5 years of just paying interest on an ARM and all of a sudden the consumer has to pay a much larger mortgage payment, what happened? They couldn't afford it and they go into foreclosure. You do that a couple million times and you all of a sudden have an economic crisis because banks have lost billions of dollars, the consumers have no money and no credit, spending comes to a screeching halt. So what does the government do? Bailout the banks that caused the whole mess (I blame the consumer also for not doing their homework and knowing what they were getting into, or if they knew and just made a risky investment)! Instead of the market naturally forcing those banks that did this the most to suffer and go out of business, the government rewarded it and gave them more funds. There is obviously a lot more to it than this, but my point is that there were banks like U.S. Bank who was largely unaffected by the mortgage meltdown because they didn't make such ridiculous loans as other banks did. So why not give a bank like that, which is well managed and makes smart business decisions, a large bailout? Make a company like that even larger because they will know how to properly manage their assets and not create such turmoil!

One last example which ties in perfectly to the whole "cash for clunkers"... the auto bailout! Why spend billions of dollars to bailout the auto companies that have been for years producing vehicles that don't retain their value and have low gas mileage? Out of the hundreds of vehicles on the "clunkers" list you don't see too many Hondas or Toyotas. Why? Because their cars are some of the highest rated for retaining their resale value and for their fuel efficiency. Last time I checked, they also had some of the highest safety ratings among some of the least expensive vehicles. So again, where is the incentive? If you give billions of dollars to a company that makes poor business decisions and makes a "clunker", do they have incentive to make a better vehicle? Maybe. But if I was being told that I was "too big to let fail", I'm pretty sure I could pretty much do whatever I want and know that I would be ok. Instead, give billions of dollars to automakers like Honda and Toyota and have them ramp up their production scale and keep producing excellent cars like they have been. If that were the case, the other automakers might get the idea that they need to make a better, more fuel efficient, and reliable vehicle in order to compete.

I'm all about the free market and letting the decisions of society work itself out with as little government intervention as possible. If, however, the government is going to be involved (especially like it has been for the last year) then it needs to intervene by placing the incentives in the right place. Otherwise, it continues to promote mediocrity and more people gain a dependency on the government. As this happens, accountability is reduced from the individual and suddenly the government is responsible for everything and will be controlling our lives more than we want it to. This government snowball is rapidly picking up momentum as it is rolling down the mountain.....