Wednesday, October 30, 2013

What A Surprise: Cash For Clunkers Was Not Very Effective

The October 30, 2013 Detroit News reports on a new study concerning the "Cash for Clunkers" program that the Obama Administration had Congress pass as part of the $787 billion stimulus program -- that generated no real stimulus:
A Brookings Institution study found the $2.85 billion program “provided a short-term boost in vehicle sales, which were pulled forward from sales that would have occurred in subsequent months. There was a small increase in employment but the implied cost per job created ($1.4 million) was far higher than other fiscal stimulus programs.”
The study — from researchers Ted Gayer and Emily Parker — said the “Car Allowance Rebate System,” or CARS did little to boost employment. This is at least the fourth major study since 2012 that has raised questions about the value of the program.
The study said far more jobs could have been created using other government stimulus programs — increasing unemployment benefits (at $95,000 per job); $80,000-$133,000 per job created for cutting employers’ payroll taxes; $222,000 per job created for reducing employees’ payroll taxes; $200,000 per job created for providing additional Social Security benefits; or $222,000 per job created for allowing the expensing of investment costs.

From The Detroit News: http://www.detroitnews.com/article/20131030/AUTO01/310300106#ixzz2jEzCgFO0
Even the promised environmental benefits were pretty tiny.

One aspect that the article did not address directly was that by removing large numbers of older, generally still functional cars from the used car marketplace (because the law required their destruction), they drove up the cost of used cars.  Used cars are still astonishingly expensive today, to the detriment of poor people, who are, amazingly enough, the major buyers of very used cars.

But what do Democrats care about poor people?  They just want their votes.

3 comments:

w said...

Yeah, I saw plenty of still usable with life in them vehicles sitting in the lots of the car dealers waiting to be destroyed (they had to ruin the engines). As someone who's newest car is a 1993--I can't afford a new car on my Obama economy lower salary--I definitely hated that program!!!!

Unknown said...

A week or so ago I saw a graph on the average age of registered cars and light trucks registered in the US.

The average age of vehicles on the road has been increasing by 2 to 3 months a year every year for the last 15 years, or by about 1 year every four to five years.

Cash for clunkers did not bend that trend line at all, and yet it has had a vastly noticeable effect on the price of used cars. What I'd like to see is year by year histograms of car age. I suspect that there will be interesting stuff in the change between years in age distribution.

Remember for every car removed from the market in the program, there was a new car sold. So while two-thirds of a million cars of varying age were permanently removed from the market, there was a counterbalancing burst of brand-new car registrations in that July and August. Now, I suspect that nearly all of those purchases would have happened anyway, but not within the subsidy program months, so they were vampired from sales in subsequent months and years. In effect we have say 5% to many 2009/2010 model year cars compared to the "normal" distribution pattern of previous and subsequent years.

asdf said...

" ... the “Car Allowance Rebate System,” or CARS did little to boost employment."

No, but it's a great acronym! Somthing Godel-esque about it.