The Cash for Clunkers program is turning out much as I warned:
Nationwide, customers snatched up 700,000 new cars, most of them foreign-made, and the government ended up paying out nearly $3 billion toward the purchases. But from the start, analysts predicted that Cash for Clunkers would not boost sales for the year. September’s sales swoon seems to be making their case. Car sales are usually slow after Labor Day, but because of the recession consumers this year are especially reluctant to say yes to major purchases. To make matters worse for dealers, most are still waiting for voucher reimbursements.
“It was probably, in the end, a complete waste of taxpayer money,’’ said John Wolkonowicz, a senior auto analyst at IHS Global Insight, Lexington forecasting firm. “The dealers, who were supposed to be the primary beneficiaries, many were forced into cash flow problems because the government didn’t pay them in a timely fashion.’’
It just time-shifted sales earlier and later without altering the fundamental problems in the car industry and it did so on the taxpayer’s dollar. Note to Congressmen: if popularity is the sole criterion for whether a program works or not, why not just throw money from an airplane? At least there’s some possibility that approach wouldn’t end up going almost exclusively to people in the two highest income quintiles.
Hat tip: in a roundabout sort of way to Glenn Reynolds who doesn’t actually link to the article quoted above but links to something kinda like (I think) that’s currently being Instalanched and is inaccessible.
. . .why not just throw money from an airplane?
Oh, you’d like that, wouldn’t you? That would work out just fine for people who happened to be near a major airport such as, oh, O’Hare? Wouldn’t be so great for people in rural areas. But I suppose you didn’t think of that.
Riiiight.
I imagine we’ll hear more support for this plan of yours from residents of New York, Atlanta and Dallas.
So many issues, so little time.
For the life of me I don’t know why you would think it unbecoming. These are serious issues with serious consequences. People’s lives are affected by policy. We should not act as if we are polite brandy drinking, cigar smoking gentlemen at the club. Bring it on.
Observations:
1. Cash for clunkers behaved just the way a direct fiscal stimulus (aka tax cuts) policy would be expected to behave: immediately.
2. In this regard it shows the desirability of tax reduction as the primary fiscal policy tool: it works NOW. Pork, er, stimulus spending, on the otherhand, takes forever. Talk to those who are unemployed about the importance of time.
3. The criticisms of coure are valid:
– it creates deficits………..but so does stimulus spending.
– CFC directs social policy…….but so does stimulus spending, not to mention pork.
– it is transitory………but so is stimulus spending – dig and refill a hole 3 times and you are done.
4. The benefit of general tax reduction is that it does not direct social policy, it let’s Americans decide if they want to spend on cars, TV’s, debt reduction, vacations, home improvement or what ever. Said another way, the general economy decides the best allocation, not Team Barry, Nancy and Harry. (very scary)
That, no doubt, is why I have never seen a tax multiplier less than a spending multiplier, no matter the cloudiness around this isse.
I do note that broad tax relief eliminates the ability for politicians to directly give out candy for votes. Call me crazy, but………….