The president touts his clunker-for-cash program, that gives up to $4,500 to consumers who trade in an old, gas guzzling car in return for a more fuel efficient one.
Obama thinks the effort is a great success, because of how quickly the $1 billion program is running low on funds as car buyers race to capture the $4,500 subsidy.
Of course people are using the program - it is a big subsidy to buy a car. This isn't success. Any good or service will experience increased demand if the government subsidizes it, particularly if the subsidy expires soon.
As example, if Obama wants to stimulate the depressed restaurant sector, he could provide vouchers which pay part of a meal. Same for struggling airlines and retailers.
Moreover, another impact is that some car buyers probably deferred their purchase during the time the program was debated in Congress and pending its start - which shifts purchases between months.
It is disturbing that Obama and the Democrats are surprised at the subsidy's impact. It confirms that their knowledge of economics is limited. And it also provides more evidence that they don't know what they're doing, since they shouldn't be surprised at the result.
Moreover, the program literally entails a destruction of wealth. The cars turned in have their engines destroyed, meaning either the car is destroyed or a new engine is installed at significant cost. It may be a shocking conclusion, but the destruction of assets does not help the economy.
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