On the heels of its ballyhooed "Cash for Clunkers" program for cars, the federal government is expected to finalize details in the coming weeks of another tax-supported shopping extravaganza, known as "Cash for Appliances."This program is just as misguided as the original Cash for Clunkers. The only half-way respectable argument in its favor is the one offered by the Council on Economic Advisers:
Supported by $300 million from the economic stimulus, the program will offer rebates to consumers who buy energy-efficient refrigerators, dishwashers, air conditioners and other appliances to replace their older models.
Clunkers "is one of several stimulus programs whose purpose is to shift expenditures by households, businesses, and governments from the future to the present," the council wrote in a September report. "Such time-shifting is valuable in a recession, when the economy has an abundance of unemployed resources that can be put to work at low net economic cost."This view could be right in principle, but it is unlikely to be right in practice. Just as governments are error-prone and easily swayed by special interests when it comes to picking industries to support (industrial policy), they are likely to miscalculate often in picking when and where to stimulate.
Plus, this particular stimulus requires destruction of consumer durables that still work, an unambiguous waste.
Given its $300 million size, the program cannot have much influence. But a better approach with that $300 million is to reduce tax rates and let consumers choose how to spend their money.