Great Moments in Unintended Consequences: Price Controls, Hearth Tax, Cash for Clunkers (Vol. 9)

Good intentions, bad results.

Part One: Antwerps

The year: 1585

The problem: The Spanish army is besieging Antwerp, shelling approaching merchant ships and causing food prices inside the city to rise.

The solution: Enact strict price controls on food!

Sounds like a great idea, with the best of intentions. What could possibly go wrong?

It turns out merchants don't like risking their lives, ships, and cargo—especially when their goods fetch the same prices at ports without incoming cannon fire. Artificially low prices also fueled demand, causing food supplies inside the city to plummet.

It wasn't long before Antwerp surrendered, given that the city government blockaded itself far better than any army ever could.

Food for thought? Well, it's the thought that counts.

Part Two: Change of Hearth

The year: 1662

The problem: King Charles II needs more money!

The solution: a hearth tax! Since the number of fireplaces in a building is considered a proxy for wealth, this progressive property tax scheme was sure to be a hit.

Sounds like a great idea, with the best of intentions. What could possibly go wrong?

It turns out people don't like paying taxes! They also don't like petty constables and subcontractors entering their homes to count stoves. Many stopped up their chimneys to avoid the taxes. One intrepid baker even knocked through the wall from her oven to access her neighbor's chimney—causing a fire that destroyed 20 homes and killed four people.

And since the revenue generated was less than expected, it wasn't long before the hearth tax also went up in smoke.

Part Three: Clunk and Disorderly

The year: 2009

The problem: a recession! And we need to save the environment! And domestic manufacturing! Plus, something about economic inequality! And, you know, maybe juice the reelection campaign. All that. All that was the problem.

The solution: Give away $1 billion in incentives to U.S. residents who destroy their old cars for more fuel-efficient new ones!

Sounds like a great idea, with the best of intentions. What could possibly go wrong?

It turns out people like free money! The program blew through the original allocation in less than a month. So Congress approved an additional $2 billion. The next month, that money was gone too.

Turns out the boost in vehicle sales was fully offset by a falloff once the program ended. Same for the boost to gross domestic product.

The government spent $1.4 million on the program for every job created.

And apparently destroying an entire generation of used cars causes remaining used car prices to rise. But hey, those are just the kind of vehicles less affluent people buy. The kind donated to charities or sold to poor countries where they replace even older, less fuel-efficient vehicles.

What about helping U.S. car manufacturers? Nope.

Only two of the top 10 models sold as part of the program were domestic brands.

As for the environmental impact?

The program did increase average fuel economy in the United States by…err…0.65 miles per gallon. But people like using new cars way more than old ones. New vehicles are driven as much as three to five times more than genuine clunkers.

And about that reelection campaign? Ehhh…

Great moments in unintended consequences: good intentions, bad results.

Written and produced by Meredith and Austin Bragg; narrated by Austin Bragg

[jsn]

I remember when a $1B government boondoggle seemed like a lot of money.

[Dawntreader]

Cash for Clunkers made it so hard for me to buy my first car. All of the old trucks I wanted to buy were getting crushed. And even worse, the government MANDATED the vehicles be totally destroyed. They junked the entire thing. Huge waste.

[notme]

Also Cash for Clunkers ignored the environmental impact of manufacturing. Using a less-efficient car is still less energy than building a whole new car prematurely.

[nmuskier]

In 2021, I stopped assuming that the consequences were unintentional.

[smareng]

One show that will NEVER run out of material. Not sure if it's more depressing or hilarious that governments never learn, but if I don't laugh, I'll cry.

[thadrepairsitall]

We are still experiencing the consequences of "Cash for Clunkers". Steel and aluminum prices dropped because of the glut of materials released into the market quickly. The quick change in price greatly affected demolition recyclers, auto scrap yards, and the like. Many scrap yards closed down reducing the availability of parts to fix cars which increases the price for repairs. Many engine replacements almost doubled in price.

[DalTron]

I remember I had a neighbor that just needed a part for their old suburban and couldn't buy one becuase the cash for clunkers wouldn't let people take parts off of the cars they were destroying.

[dashsocur]

I remember going to a town hall meeting in small town Iowa where Representative Bruce Braley was claiming credit for Cash for Clunkers. He was not only extremely proud of it but was completely baffled that he wasn't getting praised for the idea (he actually got a lot of flak for it). Even at the time it was passed, the working classes thought it was a terrible idea.

[Aaron.Reichert]

I remember "cash for clunkers"
The part that surprised me was that a brand new Hummer would qualify, but my rust bucket that burned oil didn't because when it was brand new the mpg was too good. Nevermind that being well over a decade old it's actual MPG was not so great anymore.

Great branding, deceptive though.

[lizziebreath]

I worked data entry on Cash for Clunkers back when I was 19, it was my first job that made over $10/hr. A truly in a way shocking and in a way completely unsurprising amount of those claims were fake. Fake ID's, Stolen cars, expired documents, and even one car lot that was using a transparency to keep the cars. Every single one I pointed out to the guy from the dept of transportation on the floor was the same response "Push it through".

I got sent home early 3 days for working "too fast" because the government doesn't appreciate people who know how to skim for relevant information but doesn't care if Harry Boner(real fake ID I turned down behind the DOT guy's back because I have a conscience) buys a car with government money and some else's insurance that had the wrong car listed.

[snnyburnett]

Cash for clunkers was one of the worst policies. The used market NEVER recovered, lack of affordable used vehicles available delays kids from entering the job market and truly becoming independent. It's a poor tax to keep lower middle class americans on the bus and dependent on government.

[karozans]

In Arizona, a county is getting ready to vote in water rights restrictions. If you don't water at least 2 acres of land per year, then you lose your water rights and you can never put any water on your land commercially again as a farmer.

So here is what I see in the future. People watering 2 acres of dirt and weeds for nothing, just so they can keep their water rights, and the actual ground water consumption goes up.

But then again without farm subsidies, who in their right mind would start a farm in a desert? I talked with a farmer in Colorado, and when I told him about the irrigation in Arizona, he had no idea what I was talking about. In certain parts of Colorado, you plant your field and let the rain do the rest.

[elvenskyarcher]

As a young car guy in a low income area, I will forever get heated about the stupid idea that was cash for clunkers. Thank you, useless government, for making it even harder for young people to survive on the little money they make.

[edd]

Just read about the price controls in Antwerp in Thomas Sowell's Economic Facts and Fallacies. I highly recommend that book.

[Vaelosh]

>The government passes anything
"Good intentions, bad results"

[redtsun]

When my oldest brother was 16, he bought his first car for about 500 dollars. That was in 2005 I think. When I turned 16 and started looking for MY first car, similar vehicles were going for 2000+. Only the most broken down, decrepit clunkers were selling for below $1, 000. So I started looking into why cars were so expensive, and found out about the whole "destroy your old car, buy a new one" thing and I gotta say, it has to be the most retarded idea imaginable. Why destroy a perfectly good car that runs, just because it's old?

[TheSchaef]

That last one still grinds my gears. It priced us out of a used minivan right as we were trying to upsize from a sedan to accommodate our growing family.

[stubeing]

Epa rule to limit diesel emissions. Diesel exhaust fluid (DEF) and other costly engine changes have reduced emissions, but trucks now get fewer mpgs, thus requiring more gallons of fuel to get around. These changes also reduce the engine longevity, thus requiring trucks to be replaced sooner.

[justinpaul]

You also forgot that Cash For Clunkers created a parts shortage since the cars traded in were mandated to be have their engines destroyed.

This also was exasperated when that earthquake in Japan shut down parts manufacturing.

Oh, and because the engines were scrapped, the price of scrap metal crashed, causing a drop in metals recycling.

[TrentCantrell]

You have my vote to make this required viewing in every high school classroom.