June 9, 2009

June 9, 2009 | Commentary on Taxes, Economy

New, Convoluted Auto Bailout

The Senate is considering a so-called "Cash for Clunkers" program. The idea behind the legislation, offered by Debbie Stabenow (D-Mich.) and Sam Brownback (R-Kan.), is that if you trade in your older car or SUV, the government will provide you with a voucher up to $4,500 to purchase a new car or SUV that is more fuel efficient. Supposedly this would boost new car sales and help the beleaguered auto industry while also reducing global warming.

In reality, it's a big government idea with many startling, unintended consequences. Meanwhile, even the intended consequences are bad for taxpayers, because this legislation is estimated to cost between $3 and $4 billion.

One unintended consequence of this bill is that it would further hurt the poor. That may seem counterintuitive. Yet the best way for a family to qualify for the program is for it to purchase an overpriced hybrid vehicle. If a family is struggling to put food on the table, even a $4,500 voucher doesn't make such a car affordable. The only way for a low-income family to participate is to incur more debt.

If you own a "clunker," you would be harmed by this legislation, because it would remove old cars, and old car parts, from the market, making older cars even more expensive to buy and to fix. Because the government plans to destroy the "clunkers" traded in -- even if they are perfectly good vehicles -- the supply of used cars will dwindle and both used -- and new-car prices will increase.

Environmentalists don't see this as a problem, nor do automakers, because they want to use the power of the state to drive new car sales. But conservatives should be wary. As we have seen repeatedly over the past year, when special interests win, the ordinary American loses.

Liberal Pushes 'Vehicle Miles Traveled Tax'

If you like high taxes and don't care about your privacy, you'll love the plan of House transportation Chairman James Oberstar (D.-Minn.) to raise gas taxes and his idea to impose a creepy Vehicle Miles Traveled Tax (VMT).

An Oberstar spokesman says Congress may have to pass an increase in the gas tax or a VMT to pay for $500 billion in new transportation projects this year. An increase in the gas tax makes little sense with gas prices already rising again, and would merely slow the economy further in a time of crisis.

The VMT is an especially onerous tax for consumers, because it both invades privacy and punishes those who live in rural states. The government would use satellite tracking devices to record how far a motorist drives and then send the driver a tax bill in the mail at the end of the year. If you drive in rural Montana or Wyoming you obviously would get hit much harder than drivers in Massachusetts and New York.

Another Foreign Relations Bungle

Last October, President Bush removed North Korea from the State Department list of State-Sponsors of terrorism in return for North Korean agreeing to international verification of its pledge to abandon nuclear weapons. Pyongyang subsequently denied the quid pro quo, causing Six Party Talks to stall at the end of the Bush administration. Despite expectations that North Korea would adopt a more accommodating policy after the change in U.S. leadership, Pyongyang has engaged in a rapid-fire series of provocations, including abandoning nuclear negotiations, launching a long-range Taepo Dong missile, detonating a nuclear weapon, and threatening war against the U.S., South Korea and Japan.

Because North Korea violated the terms of the agreement, Senators Jim DeMint (R.-S.C.) and Sam Brownback (R.-Kan.) last week filed amendments to the FDA Tobacco bill to require the secretary of state to put North Korea back on the terrorism list. DeMint declared, "Removing North Korea from the list of terrorism sponsors has been a disaster and Kim Jong Il has exploited the move by accessing previously frozen funds to enable his ambitious pursuit of nuclear weapons."

Conservatives want to see the Obama administration send a strong signal that North Korea cannot continue to violate UN> resolutions and use military threats to achieve its objectives. The U.S. should press for comprehensive punitive measures against North Korean and foreign companies, banks, and governments complicit in violating UN> limits on Pyongyang's nuclear and missile programs. At the same time, Washington should continue to hold open the potential for negotiations, although making clear North Korea cannot use diplomatic negotiations as an excuse to further its military goals. But, since international pressure has failed to prevent North Korea from continuing its development of nuclear weapons and the means to threaten the United States, the Obama administration should continue the development and deployment of missile defense systems.

Brian Darling is director of U.S. Senate Relations at The Heritage Foundation

About the Author

Brian Darling Senior Fellow for Government Studies
Government Studies

First Appeared in Human Events