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gmThe NY Times reports that GM Adds Workers and Shifts as Demand Surges. Due mostly to the Cash for Clunkers program, the US auto industry looks like it is recovering. Cash for Clunkers was sold as a program to reduce emissions, help the economy, and restore manufacturing jobs, but does it really?

Many people in the US seem to think that good for business means good for the economy. That is another fallacy that is fairly easy to understand. Let us take a look at what is really going on.

Cash for clunkers is basically a subsidy to car manufacturers. People get a new car, but industry ends up with the money. Where does the money come from? Ultimately, the taxpayer. Given that the government is already deep in debt, the extra borrowing increases interest rates, and that is a great deterrent to private investment. Emission reduction? New cars must get 22 miles to the gallon to qualify. Sorry, but that is a very low standard to set for a program that comes at the expense of consumer income and potential investment in other areas of the economy.

Cash for clunkers is not a program for emission reduction, not a program for the economy, not a program for jobs. It is only a transfer of income from the worker to industry.

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