Posts Tagged ‘Cash-for-Clunkers’
September 20th, 2010 at 12:33 pm
Economists’ Study: Cash for Clunkers a Failure, Not an “Overwhelming Success”
Posted by Print

Over and over again, President Obama and other defenders of trickle-up stimulus labeled 2009’s “Cash for Clunkers” a positive example of federal spending and market manipulation.  Obama himself eagerly called it an “overwhelming success,” and Nancy Pelosi curiously professed that it “has been successful beyond our wildest dreams.”

Economists’ verdict?  Not so much.

Writing for the National Bureau of Economic Research, economists Amir Sufi from the University of Chicago and Atif Mian of the University of California Berkeley report that Cash for Clunkers had no substantive net positive effect:

A key rationale for fiscal stimulus is to boost consumption when aggregate demand is perceived to be inefficiently low. We examine the ability of the government to increase consumption by evaluating the impact of the 2009 “Cash for Clunkers” program on short and medium run auto purchases. Our empirical strategy exploits variation across U.S. cities in ex-ante exposure to the program as measured by the number of “clunkers” in the city as of the summer of 2008. We find that the program induced the purchase of an additional 360,000 cars in July and August of 2009. However, almost all of the additional purchases under the program were pulled forward from the very near future; the effect of the program on auto purchases is almost completely reversed by as early as March 2010 – only seven months after the program ended. The effect of the program on auto purchases was significantly more short-lived than previously suggested. We also find no evidence of an effect on employment, house prices, or household default rates in cities with higher exposure to the program.”

This is Obamanomics and “stimulus” policy in a nutshell:  Billions in spending, but no positive effect.  Future generations forced to pay for it will not be retrospectively amused.

October 21st, 2009 at 10:53 am
Cash-for-Clunkers Could Be Money-for-Make-Work

The last sentence on Pennsylvania Senator Arlen Specter’s entry on The Huffington Post says it all:

We could all take a lesson from FDR.”

And what, pray tell, might that lesson be? Apparently, that it is the government’s job to put people back to work when the private sector can’t. The key to the Specter Plan is creating an indirect subsidy to out-of-work people via cash incentives to employers for hiring more workers. For example:

A tax credit to encourage employers to create new jobs or extend hours worked is just the kind of direct subsidy that worked so well with the cash-for-clunkers program. That was about cars. This is about jobs and people, an unquestionable priority. The moral imperative to act is aggressively clear.”

Astute readers will notice a disagreement between this author and the Gentleman from Pennsylvania about whether paying one party in order to benefit third party is a “direct” or “indirect” subsidy. Logic would seem to dictate that if one wants to help someone pay his bills, the most efficient way to do so is to skip the go-between and give the man some money. If people need help now – and many do – why not send them a check that covers the cost of bills and requires the recipient to get relevant job training? In today’s credential-crazed economy, the time and money spent earning a Microsoft Office certificate or sales license would go a lot further in landing a job than bribing employers to hire people they can’t otherwise afford.

And what about the alleged success of the cash-for clunkers program? The long-term effects of the program reduced the number of used cars thus driving up the price of those that remained. This FDR-style intrusion into the market decreased the sales of used car dealers and put car purchases out of reach for the poorest families. Now, Specter wants to spend more taxpayer money on jobs that cannot be sustained without subsidies. There may be a moral imperative to act. But like health care reform and the bank bailouts, the only worthwhile government acts are those that get the private sector moving away from the public’s money as fast as possible.