The Ottawa Citizen recently reported that the Federal Government is considering a cash-for-clunkers program:
Environment Minister Jim Prentice said Saturday he’s reviewing whether Canada should follow the United States and several European countries in offering consumers a substantial financial incentive to scrap their clunkers and buy new vehicles.
Prentice said he’s met with a number of auto manufacturers over the past few months to discuss the prospect of giving Canadians $3,500 to trade in their older, polluting vehicles.
As someone who drives a 1992 Honda Accord I’m not sure I like this idea very much despite the fact that it would probably financially benefit me. I mean, who wouldn’t like a Government program that pays up to $3,500 for their $1,000 (if that) car that is on its last set of wheels? But let’s set aside personal considerations for a moment and look at the downside: a big fat subsidy to buy private cars will simply pull in future demand to the present and mostly benefit people who plan to (and can afford to) purchase a new car in the near future whether or not they get a subsidy. New demand — i.e. people buying a new car solely to take advantage of the subsidy — will most likely be very small. Would a massive new spending program that benefits owners of clunkers at a time of soaring fiscal deficits qualify as wise expenditure of public money?
