Posted on 08/10/2014 2:43:53 AM PDT by afraidfortherepublic
“Cash for Clunkers,” the 2009 Obama administration stimulus program designed to spend $2.85 billion to jumpstart the auto industry, turned out to be a complete disaster — for the auto industry.
In the minds of Obama’s team of advisers and economists, the program made total sense, of course. The plan was to dangle a $4,500 credit to persuade car owners to trade in their older automobiles for new cars with better fuel efficiency. It would stimulate an economy then in the midst of a deep recession. As a bonus, it would mean less oil consumption and cleaner-running cars.
The law of unintended consequences is a brutal thing, though, especially for inexperienced, shortsighted policymakers.
According to the findings of three Texas A&M University economics professors, “Cash for Clunkers” ultimately caused auto industry revenue to shrink by about $3 billion in less than a year
The professors issued the results of their research last month in a National Bureau of Economic Research-sponsored working paper entitled “Cash for Corollas: When Stimulus Reduces Spending.”
“This highlights how — even over a relatively short period of time — a conflicting policy objective can cause a stimulus program to instead have a contractionary net effect on the targeted industry,” the trio of economists wrote, according to The Wall Street Journal’s Market Watch.
“By lowering the relative price of smaller, more fuel-efficient vehicles, the program induced households to purchase vehicles that cost between $4,000 and $6,000 less than the vehicles they otherwise would have purchased.”
For one month, the nearly-$3 billion program increased the sales of tiny, low-profit-margin vehicles. In the next few months, though, all sales faded rapidly.
Overall, the Obama administrative initiative produced exactly no net increase for the number of automobiles Americans purchased.
“In this particular case, environmental objectives undermined and even reversed the stimulus impact of the program,” the professors wrote, according to Market Watch.
It is a given that any program designed by liberals to elevate the economy is doomed to failure. Virtually every program designed by liberals inevitably turns to dreck. And this program was basically thought up by an avowed Marxist, Van Jones. What could go wrong? (snicker)
Yeah...and at a great environmental impact.
Lot of lead...plastics and waste oil mixed with silicon sand (that couldn't then be recycled)
Thank you fellow FReepers. I got 4 grand for an 11 year old Ford Explorer, with 180,000 miles on it and a leaky head gasket among other problems, and bought a new Subaru Forester.
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YES YES YES.
And all the cars traded in were required to be destroyed.
No more used car parts for the cars not traded in either.
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I have come across this problem several times the last few years, helping out different family members who just needed basic transportation -- can't find the parts to fix the old one, can't find something reliable on the cheap.
Just mention the phrase "cash for clunkers" to any auto mechanic and their eyes will roll, head will nod, and an almost imperceptible sigh, silently acknowledging the government really screwed the little guy with that policy.
Obama had far greater insight than we give him credit for.
As it has turned out, those 2nd hand cars weren’t needed. There aren’t jobs to go to, and no money for kids to just drive around.
I have a friend who is very wiberal and a member of the GimmeDat party. I thanked him for underwriting the purchase of my 2009 Hyundai Accent. I picked up a bare bones model with stick, AC and AM/FM radio for around $5k!! I trade in a 96 Ford F150 that ran great, but sucked up the gas!!
Well, I’m looking for a used car now because my new job requires it. And everything I see is so far out of my price range that it’d almost be cheaper to quit my job.
Yup...and according to Edmunds, it cost roughly $25k in subsidies per additional car purchased.
Don’t give Van-boy too much credit.
Euros/Canada/etc were doing this decades previous, LOL.
http://en.wikipedia.org/wiki/Scrappage_program
Yes, many of the “klunkers” were decent cars that poor people could afford. So another unintended consequence was to take vehicles away from the poor that the liberals are supposed to be so concerned about.
Liberals want poor people (and everybody else except the one percenters) on public transportation.
And by various schemes, they’re working in that direction.
If I divide the $3 billion cost by the 690,000 vehicles scrapped in the program I get $4400.
Can you direct me to Edmunds’ math?
I said “per additional”. Most of the purchasers were already going to buy a car.
“This summer’s so-called Cash for Clunkers program cost taxpayers $24,000 per vehicle sold, according to an analysis by Edmunds.com.
Nearly 690,000 vehicles were sold during the Cash for Clunkers program, officially known as the Car Allowance Rebate System (CARS), but Edmunds.com analysts indicate that only 125,000 of the sales were incremental. The rest of the sales would have happened anyway.
Analysts divided three billion dollars by 125,000 vehicles to arrive at the average $24,000 per vehicle sold. The average transaction price in August was $26,915 minus an average cash rebate of $1,667.”
Cash for clunkers was part of the surveillance state.
Good bye to the independent car, hello to the black box cars that will watch and track you,
More like “Cash for Well-Connected Democratic Car Dealers.”
http://freakonomics.com/2009/11/02/lots-of-cash-for-clunkers/
(Lots of) Cash for Clunkers
FREAKONOMICS
11/02/2009 | 10:27 am PRINT
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Edmunds.com reports that its statistical analysis of the Cash for Clunkers program finds that the program generated only 125,000 extra new vehicle sales, meaning that the cost to the U.S. government was $24,000 for each of those new cars.
The reason the cost per incremental car is so high is that, according to Edmunds.com’s modeling, 82 percent of the vehicles purchased under the program would have been bought this year anyway, even without the subsidy. So Cash for Clunkers mostly just turned out to be a gift from the government to people who happened to be in the market for a new car at the right time. The auto manufacturers and dealers did not end up getting a very big chunk of the money ultimately, although they did get paid earlier rather than later in the year.
Is this surprising? Not to an economist. It is relatively easy to move around the timing of when someone purchases a durable good, but much harder to affect whether they buy a durable good or not.
Thanks. Makes sense.
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