Truth, Lies and In Between

A little Econ 101, well, maybe a little 102. Don’t worry, there are plenty of understandable analogies spread throughout.

Value and Choice
by Doctor Zero

I’ve seen some people try to defend Obama’s ludicrous Cash for Clunkers program as something akin to a tax rebate or tax credit. This is rubbish, and betrays a dangerous misunderstanding of where government money comes from. A better understanding of basic economics would help Americans avoid the kind of snake oil salesmen currently running Washington. If the public school system won’t provide such an education, then it falls to conservatives to explain the basics, in order to build support among the voters for the policies necessary to repair the damage Obama’s madcap liberalism has wrought. We can use the Cash for Clunkers boondoggle to illustrate an important point about the relationship between freedom of choice and value. C4C doesn’t just waste money – like every instrument of central economic planning, it destroys value.

Cash for Clunkers is not a “tax credit” or “rebate” of any sort. In order to be either of those things, it would have to be restricted to those who paid the taxes in the first place. Furthermore, it would have to be awarded progressively, just as taxes are assessed progressively. The top 1% of wage earners pay about half of all federal income taxes, so half of a true “tax credit” would have to go to them. Something tells me we’ll never see a Cash for Jaguars program. Tax credits never work that way. When taxes are collected progressively, but credits and rebates are given in flat amounts – or weighted toward the lower tax brackets – the credits amount to more redistribution of wealth. If I pay twice as much in taxes as you do, but we both receive the same credit, the procedure amounts to a strikingly inefficient way to redistribute my money to you.

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