Economics Beats the Obamacrats

There is a basic rule of economics that president Obama and the Obamacrats have forgotten: no matter how much the government subsidizes something that people do not want, the market for that product will collapse once the subsidies are removed. I have written about this many times, and the news tonight shows once again how accurate this rule is. The product in question here is the Chevy Volt, the electric and gasoline powered car that General Moters has been trying to market this year. We have now learned from an analysis by the Mackinac Center for Public Policy that the government has subsidized each Volt by an amount between $50,000 and $250,000 per vehicle. The range in the subsidies is the result of certain milestone achievements needed in order for manufacturers to receive parts of the subsidies. To be clear, this subsidy does not include the fact that GM is still 28% owned by the federal government.

One would think that with this enormous subsidy, sales of the Volt would be soaring. Quite the contrary is true. GM was only trying to sell 10,000 units in 2011, but it will be lucky to sell 60% of that. It was also reported today that a large portion of the sales actually made are coming from governments which are buying the Volts. The public is just not buying this car.

So why is the public staying away? Could it be the 28 mile range of the vehicle before the electric charge runs out? Could it be the price tag in excess of $40,000 for a car that is the equivalent of a gasoline powered car that sells for less than $20,000? Could it be the problem that the battery of the Volt has a tendency to burst into flames sometime within a month after the car is involved in a minor accident? Maybe it is all of these things. The truth, however, is that there is simply nothing to create actual demand for the car other than government funds.

The contrast to the Volt, of course, would be cars that run on natural gas for their fuel. These cars are not more expensive than gasoline powered cars, but they cost substantially less to operate. The natural gas powered cars do have a lesser range than gasoline powered cars, but they still will go over 250 miles on a tankful of natural gas. Because of the operational savings, owners of big fleets of truck are switching to natural gas as the fuel of choice. In other words, there is a real economic reason to buy natural gas powered vehicles, so there is no need for government subsidies.

For the electric cars, however, there is just no economic reason to make the purchase. As a result, no matter what Obama and the Obamacrats say, once the government subsidies run out on the Volt, it will just vanish from the market. Until then, Obama and his cronies are wasting billions of dollars pushing electric cars that have no future. It is a change that lacks all hope of success.