In the Great Depression, the government paid to destroy crops in order to prop up farm prices — about as dumb a policy as can be imagined.
Today the government pays to destroy cars in order to ... frankly, I don't know why.
"Cash for Clunkers" appears to be a bizarre combination of the "broken windows fallacy," the desire to change the climate of the planet, and staggering administrative incompetence. In other words, "Cash for Clunkers" hits the trifecta: bad economics, bad science, and bad government.
Witness the dying gasps of a Corvette. [After the poison is added in the first minute, the engine starts smoking at about 3:40, and gets much worse at about 4:00.]
UPDATE: More at Tim Blair.