Chevy Volt Sighting!

Some hunt Sasquatch, others search for the Loch Ness Monster, while still others seek proof of alien visitations.  This blogger hunts the elusive Chevy Volt.  The hunt finally bore fruit late last month, when this blogger captured a single photo of a Volt (see above), at an undisclosed location in the Mid-Atlantic.  (I hesitate to provide more detail, so as not to violate the privacy of the owner.  For all I know this was the only Volt in the city in question.)

As previously explained on this blog, President Obama invoked the hope that General Motors would make greener automobiles such as the Volt as one argument for his ill-advised bail out of General Motors, which has now cost the American taxpayer about $25 Billion.  It would be hard to argue that the taxpayer has gotten its money's worth.  The Volt costs a "mere" $39,145, more than a spiffy BMW 3-Series Coupe.  It's thus no surprise that General Motors has suspended production of the Volt or that some dealerships are selling fewer than 1 (one) Volt per month, despite the generous tax subsidies that Volt purchasers, who enjoy average household incomes of $170,000, receive.  Nor is it any surprise that the sales of the Ford Fusion swamp those of the Volt. 

As previously explained on this blog, the national government is ill-equipped to pick among competing uses for scarce capital, a function that free societies properly reserve to the market, so long as background rules, including taxes on inefficient externalities,  ensure that market prices reflect the actual costs and benefits of economic activity.  Moreover, once the government takes on the task of picking winners and loser, citizens will naturally invest scarce capital, time and energy in trying to convince the government to allocate capital to them instead of other citizens.    As Luigi Zingales put it more recently, describing the views of Congressman Paul Ryan (with which Zingales apparently agrees):  "Ryan opposes these subsidies, not only because they waste taxpayers’ money, but (more importantly) because they create perverse incentives: they encourage businesses to lobby Washington for preferential treatment rather than to compete in the global marketplace."   After all, the government will never have access to nearly enough capital to satisfy all the various demands for bailouts, subsidies and what-have-you.  For instance, the same year that the national government bailed out General Motors, 400,000 other businesses failed as well, apparently without receiving any bailouts.  The GM/Volt boondoggle is "exhibit A" in the case against empowering the national government to pick winners and losers.

One suspects that, within a few years, the Chevy Volt will be as rare as Sasquatch.

Subsidy For Chevy Volt Keeps Growing

Boondoggles

As previously reported on this blog, President Obama justified the ill-advised bailout of General Motors and Chrysler by claiming that the debt-financed federal ownership of these two companies would encourage the production of "green" automobiles, like the electric-powered Chevrolet Volt pictured above. (Whether such cars really are that green is a separate question; as explained previously the manufacture of batteries for such vehicles exhibits a large carbon footprint.)

A recent study described here suggests that the bailout is just the tip of the subsidy iceburg.  The study emphasizes that state-ownership of General Motors did not, in fact, suffice to encourage production of cars like the Volt. Instead, in addition to the cost of the GM bail out itself ($14 Billion), various government agencies have showered GM with Volt-related subsidies that equal between $50,000 to $250,000 per car produced. (The exact figure will depend upon whether GM satisfies certain performance criteria attached to some of the subsidies.)  Even taking the more conservative estimate, i.e., $50,000 per car, the Volt, with a sticker price of $40,000, costs a total of $90,000 per car, compared to a mere $82,000 for the "Car designed by Homer Simpson," pictured above, featured in "Oh Brother Where Art Though," episode 15 of Season 2.  (The episode and the car Homer designed insightfully illustrated the consequences of ignoring scarcity when making important economic decisions.  The car flopped and the company making it failed.  Apparently the writers did not imagine a bailout.)   It seems unlikely that the benefits of the Chevy Volt justify these costs.