Cash for Clunkers
Lifted from comments to Calculated Risks aside on cash for clunkers. Spencer says:
I get so tired of seeing people evaluate the cash of clunkers and ignoring the impact on auto inventories. During the cash for clunkers auto and light truck inventories fell from 2.7 months of sales to1.6 months of sales — the norm is about 2 months.
Auto manufactures were not going to expand production with the high level of inventories. But after the I/S ratio fell below to 1.6 auto production jumped some one-third to one half — depending on which source you use. Crains Auto News has the one-third estimate that is not seasonally adjusted while the federal reserve has the almost 50% jump uses seasonally adjusted data.
To me, by eliminating the excess inventories the cash for clunkers was a primary determinate of the huge rebound in auto output in 2008-09 that in turn was a major factor in growth in the first year of the recovery.
– See more <a href=” http://angrybearblog.strategydemo.com/2014/03/macro-policies-on-the-economy.html#comments”>here</a>
Spencer would be correct. If they hit 90 days, they are usually taking more time off.
So, paying people with their own taxes to destroy their cars was a good economic policy, along with driving-up used car prices.
No wonder we’re in a deep, and now long, depression.
Not going into a long explanation but “Cash for Clunkers” helped me and some of my friends.
While I was not a big fan of Cash for Clunkers. the RW talking point about the program driving up the cost of used cars is one of the most stupid things I have ever heard. Anyone with the slightest knowledge of the auto business knows this.
Hint: There are over 40 million used cars sold in the US every year.
And, some used cars are less than two years old.
I’m talking about older and cheaper cars. The kind low-income people buy.
Then Peak, you should say what you mean, as opposed to saying ” along with driving-up used car prices.” Course, your comment is not quite as silly as the original, but its close.
700,000 cars were destroyed. the vast, vast majority of them were unsafe to be driven. Most were not traded because of their mileage, but because of their condition.
I was still working back then, and my job put me in 25 to 30 dealerships a week from SoCal to Vegas to Phoenix. I saw literally thousands of these things, and I would be shocked if 5% could be safely driven.
Even if you put them all on the market there would have been no effect worth mentioning. Most of them had been for sale for years with no takers(vast majority had faded For Sale signs on them). The only people who make this claim are doing so because of their ideology and not any knowledge.
Strange, it is like Ryan’s “work” on poverty. He is not really concerned about it, just like you are not really concerned about cheap cars for the poor.
I STILL have couple, no brakes and a wore out front end.
‘Clunkers,’ a classic government folly
September 1, 2010
“Cash for Clunkers…That was the program under which the government paid consumers up to $4,500 when they traded in an old car and bought a new one with better gas mileage. The traded-in cars — which had to be in drivable condition to qualify for the rebate — were then demolished: Dealers were required to chemically wreck each car’s engine, and send the car to be crushed or shredded.
No great insight was needed to realize that Cash for Clunkers would work a hardship on people unable to afford a new car. “All this program did for them,’’ I wrote last August, “was guarantee that used cars will become more expensive. Poorer drivers will be penalized to subsidize new cars for wealthier drivers.’’”
Cash for Clunkers was a deplorable exercise in budgetary wastefulness, asset destruction, environmental irrelevance, and economic idiocy.
http://www.boston.com/bostonglobe/editorial_opinion/oped/articles/2010/09/01/clunkers_a_classic_government_folly/
Great.
One clueless ideologue supporting another.
Strangely enough, I thought the program was ill conceived. But the thought on used cars is pure, ignorant ideology.
After all, what poor person doesn’t need a 15 year old Explorer with 150K + in mileage and 13 mpg(even if that was it’s only problem?)
But I did not like the program, way too small and ill-directed. Then again, it only cost about the same as two weeks in Iraq and no one died. Strangely enough, it reduced(to a small degree) our need for foreign oil while Iraq was about getting foreign oil.
Strange how that happens.