Revisiting Cash for Clunkers

CashForClunkers-narrowThe Wall Street Journal has just labeled the Cash for Clunkers program “one of Washington’s all-time dumb ideas.”  (Hyperbole, of course — no program costing a “mere” $3 billion could possibly qualify for the all-time dumb list.)  Here’s their reasoning:

Last week U.S. automakers reported that new car sales for September, the first month since the clunker program expired, sank by 25% from a year earlier. Sales at GM and Chrysler fell by 45% and 42%, respectively. Ford was down about 5%. Some 700,000 cars were sold in the summer under the program as buyers received up to $4,500 to buy a new car they would probably have purchased anyway, so all the program seems to have done is steal those sales from the future. Exactly as critics predicted.

Okay.  I’d want to see a few more months of statistics before concluding that most C4C buyers bought cars “they would probably have purchased anyway,” although that’s undoubtedly true in many cases.  Also, how does the September report compare with year-ago comparisons for the months just before C4C went into effect?  (I spent a frustrating 10 minutes looking for raw statistics before realizing I just didn’t care enough to spend 11 minutes.  But why don’t news reports provide links to data sources the way blog posts do?) Since September marked the start of the financial meltdown I suspect that might have been the last relatively strong month for car sales, which would skew the year-earlier comparison.

I’m still largely opposed to the very idea of artificial spending programs in the name of stimulating the economy, and I’m ferociously opposed to the wasteful and dishonest porkulus bill.  But if there was going to be a fiscal stimulus plan — and the political realities of the spring left no doubt about that — then I still think C4C was as good a stimulus as any.  And Larry Kudlow agrees with me!

2 thoughts on “Revisiting Cash for Clunkers

  1. C4C's is not a program that I agree with when it comes to stimulation of the economy. If I was Obama's adviser, I would start a Science Fair (a lot like an elementary schools) with Cash Prizes. I would offer enough money that individuals and hard working researchers could actually get enough money to put new inventions into practice. You could categorize them and even have a most fuel efficient engine, etc. This way the $4bn would go towards new innovation and long term development of industries.

  2. There's more to C4C than sales. There's also the question of whether those dealerships will see their money from the goverment. And then there's the cost of crushing the trade-ins and verifying the process.

    Also, it was flawed from the beginning. You could trade in a Land Rover Discovery that got 11mpg for a Land Rover LR3 that got 14mpg. Not exactly saving the planet.

    In addition, I noticed several of the cars on the qualifying list got more than 18mpg. Such as the Porsche 944. I've had two of those, and each would get 30+mpg on the interstate. Even being flogged on a race track, they would do better than 18. It's as though whoever was writing the list got a call from his brother-in-law (no offense) who had a car he wanted to unload.

    The plan should have been run by people who knew cars rather than politics.

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