The CAR Allowance Rebate System—C.A.R.S—sounds like a ’70s Saturday morning cartoon about guys in striped jackets using trick vehicles to save the world. In fact, that would actually be preferable to the program currently airing, at cost of three billion and counting. Cash for Clunkers may be popular with a healthy segment of the population, but that group doesn’t include a lot of economists. In terms of economic policy, C4C would benefit from a little C4, if you know what I’m sayin’.
Warning. The following is not a right-wing diatribe. While there is very little in the public realm that can be cleansed of politics, attempting to look at the C.A.R.S plan unaligned does give one a different view. There are a few things about C4C that are not right. They’re not left, either. They’re wrong.
The most obvious case against the program is ideological: Keep government out of markets. Laissez-faire. Fair enough, except Uncle Sam sticks his fingers in many markets, frequently to the good of the nation. I like clean water, apples that don’t put me to sleep for 100 years and Amoxicillin that does what it reports to do (fix me up if the water or apples are bad). There are times when the federal government needs to intervene. Any point in the last 18 months can be considered one of those times. So, the laissez-faire agreement is weak.
My first real problem with C.A.R.S.: its effect on market timing. Putting a couple billion dollars on the barrel moves the market to act. The value added to older vehicles made some people move prematurely into the car market; people who might have considered dumping their POS before winter, or next spring. Extra sales made now will not be made later.
The announcement of the plan may very well have had a similar effect on potential customers in May and June. They waited for the C4C money to become available, putting their purchases off. The program creates an artificial buying season for no real reason. Other than to make this year’s data harder to use for predicting next year’s.
At the moment, there is no hard evidence that cash for clunkers increased the overall net business any car company was going to see this fiscal year. July numbers ticked upward, but that doesn’t mean sales came from customers who were otherwise out of the market.
Then there are the clunkers themselves. Once turned in the engines are filled with goo and run until useless. The destruction of a useable asset is waste. While some of the natural resources that went into that car can be reclaimed, the labor hours extinguish. It makes perfect sense for someone to turn in their Ford Explorer worth three large and take the Fed’s $4,500. The $3,000 in value the vehicle had is lost. The economy as a whole suffers.
Getting less fuel-efficient engines off the road has an environmental benefit. There’s also a huge environmental benefit in driving old cars into the ground. It takes a lot of fossil fuels to build cars in the first place, from the mining of the ore to assembly to shipping. Fouling the engine means these hulks need to shipped and processed again, using more energy. To the economy, waste is waste.
In terms of stimulus, three billion wouldn’t do a hell of a lot were it injected directly into people’s bank accounts. Current dollar gross domestic product last quarter was $14,149.8 billion, making C4C kind of a drop in the hot tub.
There is value in the perception that C4C generates. It is an understandable, and to many useful, stimulus package regardless of the final numbers. Its utility has been amplified by car dealers across the country. The recent meme that the program had run dry stoked the message even more.
In the end, though, C.A.R.S has interfered with a market finding a new equilibrium, one in which American’s buy 10 or 15 percent fewer vehicles per year. That’s actually better for the environment than the amount of hybrids sold in the next ten years. It can be painful to adjust to such market contractions, but that’s where government programs really do come in handy. Combating market forces is rarely the best use of public funds. If people want fewer cars, or want to get more life out of the ones they’ve already got, its tough to say that’s bad for America.
Fostering the growth of new markets—like renewable energy sources—and retraining a work force to fill needs in those new markets are constructive uses of tax dollars. They add to the GDP in a way junking a ’98 F-150 never will. This ain’t Saturday morning. C.A.R.S are not going to save the world.
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You lost me after your strawman dismissal of free market economics.
“At the moment, there is no hard evidence that cash for clunkers increased the overall net business any car company was going to see this fiscal year. July numbers ticked upward, but that doesn’t mean sales came from customers who were otherwise out of the market.”
And, there is also no hard evidence to the contrary. It always seems strange to me when people make the “no hard evidence” argument against an opposing positing while at the same time not having the corresponding hard evidence to support a contrary view. Obviously nobody knows what is going to happen in the months ahead. We do know with absolute certainty that the C4C program jump started sales in an industry which had run for over six months at something like 30% below historical sales rates. Say a person suddenly goes into cardiac arrest and the paramedic uses a defibrillator to get their heart pumping again. Maybe the lucky SOB goes on to live another 20 years. Maybe he or she dies next month. In either case, hitting ‘em with the paddles was still the best choice.
“In the end, though, C.A.R.S has interfered with a market finding a new equilibrium, one in which American’s buy 10 or 15 percent fewer vehicles per year.”
Until C4C kicked in the market was running way, way below that 10-15% adjustment number you pulled from the air. Six to twelve months from now we will be able to better judge if C4C was a temporary boost followed by another crater or if it was an element of an economic defibrillation which gave the US automotive economy another lease on life. Many think it is the former. I think it is likely to be the later. Nobody actually knows with any degree of certainty. Which, by the way, is why the automakers are all scratching their heads trying to figure out what to do visa-vis production plans for the months ahead.
I agree that many driveable vehicles were clunked yet there is the macro economical value to the economy that provides much needed spending in the coming months to resupply dealers lots with the same vehicles that qualified for the C4C cash and due to extreme shortages of these higher mileage vehicles we will again create a pent up demand for all of the Ford Focus’, Escape’s. Civic’s etc.
I just hate how it takes cars that have lots of spare parts and trashes them.
If 16 year old kids don’t learn how to fix their w-body GM product by making (endless) repairs on it, how will they learn to love cars?
Everybody should experience the fun of going through a U-Pull-It yard… but only after they get their tetanus shot from their government-provided health care program.
And of course – what dorm room wouldn’t be complete without a front bucket seat pulled from a Cadillac and mounted on some 2×4s?
You should Google “Broken Window Parable Fallacy“
Your first point:
Extra sales made now means less sales later.
That’s the point. If we were to wait, the recession would be alot longer. If enough cars are sold now, the economy would get going again and hit rock bottom alot sooner and alot better than if there wasn’t this injection of money. That’s why it’s called a stimulus plan. lol
Old car engines are ruined:
Yes, they are, but they’re inefficient and old anyways, and they weren’t worth alot probably.
About the 2 billion dollars going directly to the people:
HELLS NO! You can’t say that it’d help more, because you don’t know. When you subsidize these durable goods with big big costs, it means alot of money extra is being injected into the economy.
i.e. 3500 dollars rebate leads to a person buying a 20000 dollar spending.
Simply injecting two billion dollars would increase the money supply by alot, and since everyone would get like 5 bucks, they wouldn’t spend anything but save it in the bank instead.
I can’t wait til C4C is over so we can start talking about new cars again and avoid politics. :O
Everybody should experience the fun of going through a U-Pull-It yard… but only after they get their tetanus shot from their government-provided health care program.
+1
“And, there is also no hard evidence to the contrary. It always seems strange to me when people make the “no hard evidence” argument against an opposing positing while at the same time not having the corresponding hard evidence to support a contrary view.”
No evidence is no evidence, that was exactly the point. It isn’t always about negative vs positive.
Where’s the stimulus for the back to school parents who have to buy bigger clothes and shoes for their kids?
Where’s the stimulus for those of us who need a computer at home for their kids to be more efficient with their time?
Where’s the stimulus for overweight people to have gym memberships paid for and lose some weight, reducing the strain on our healthcare system?
Where’s the stimulus to provide wireless internet access to everyone for ‘free’?
Since I’m entitled to a $4500 for buying a fuel slurping behemoth and can now cash in on its lack of resale value, why can’t I get stimulus for these other things that are arguably more important?
“Once turned in the engines are filled with goo and run until useless.”
I view that as a crime that no piston head should forgive.
Extra sales made now will not be made later.
The finance guy in me — and that guy is pretty big, in case you hadn’t noticed — bristles at this one.
The time value of money states that a dollar received today is better than a dollar received tomorrow, because that dollar received today can be invested.
Even if it was accurate to claim that some of the sales were merely accelerated by several months, that does not mean that the program was a bad idea. Rather, you’d have to apply a hurdle rate (required minimum rate of return) to the analysis, and determine whether it was worth paying that much to get those sales moved up.
C.A.R.S has interfered with a market finding a new equilibrium
And right now, that would be a damn good thing.
Let’s understand something — we came very close to the entire western world going into economic freefall. That would have been a horrendous mistake that would have destroyed the lives of hundreds of millions or perhaps billions of people, including people who are reading this comment now and believe otherwise. You would not want an angry, hungry, well armed population with worthless stocks and 25-30% unemployment, homeless and pissed off about the American dream kicking them in the ass.
We should not want the economy to experience the “natural” wonders of creative destruction when the results are the economic equivalent of a hydrogen bomb, any more than you’d want your gas tank to explode just for the sake of adding flavor to your next car accident. There’s recession and then there’s the end of the world as we know it for years to come.
It is only because people have managed to avoid the realities of a worldwide meltdown that we can afford to be so sanguine about it now. Yes, this program will be inefficient and not the sort of thing we’d encourage under normal circumstances. Under normal circumstances, the free market does work better.
But these are not normal circumstances. If this in conjunction with everything else contributes to GDP growth and increased consumer confidence, and the business development that goes with those things, then by all means, bring it on.
The real benefit of it is that each consumer who receives it dumps a big chunk of their own change into the economy, which feeds the multiplier. This is not so much about cars, as it is about creating large pieces of consumption in a single purchase, within a relatively short time period.
BRILLIANT!
Brilliant, brilliant, brilliant.
I have been saying the same things for a long time.
This C4C is a lame attempt to “stimulate” the economy. It simply will not work.
Once this last dose of cash runs out, the automakers and their dealers will be going through withdrawals. Sales will be piss-poor for the rest of the year…while there is HUGE inventories of automobiles that are being boosted now.
The dealers do not like this C4C program…they are having to leverage capital to cover the $4500 (and any MFR. rebates) IN THE HOPES that the Govt. actually pays them.
What if the Govt. doesn’t pay? Then the dealer is out all of that money. Do they have any recourse? We have already heard stories “clunkers” being accepted on day, and then not the next.
PLUS, I predict that in 6 mo. there will be a lot of cars repoed because people cannot pay their bill.
There are HUNDREDS why C4C is a terrible idea…but…Al Gore should be happy, and isn’t that the most important thing?
why can’t I get stimulus for these other things that are arguably more important?
Because those things aren’t part of “the agenda” yet.
But these are not normal circumstances.
Market corrections are most certainly “normal”.
Don’t forget that we borrowed every nickel of the $3B and will be paying interest on it forever.
jkross22, Virginia’s Sales Tax Holiday says hello on school supplies. And preventative health care has shown cost savings in certain cases.
Would you also like to complain about business depreciation tax credits?
lw nailed it. That is by far the most important reason why C4C will fail in the long run.
We’re also rewarding bad behavior. The only folks who can benefit from this are the ones who bought gas guzzlers. The ones who kept their fuel efficient car maintained well for over 10 years or 200,000 miles will get absolutely no reward whatsoever. In fact, they will be victimized by a system that rewards the glutton.
I have no problems with this program going through IF the budget is balanced and everyone has the opportunity to receive a subsidy so long as they improved their MPG. But even so, the reward should not come in the form of a rebate. It should come in the form of a tax credit and be completely independent from the dealership negotiations… other than to verify that the vehicle actually qualifies.
My first real problem with C.A.R.S.: its effect on market timing. Putting a couple billion dollars on the barrel moves the market to act. The value added to older vehicles made some people move prematurely into the car market; people who might have considered dumping their POS before winter, or next spring. Extra sales made now will not be made later.
I’ve heard this argument made, but it doesn’t stand up to any real scrutiny. To qualify for C4C, the car had to be worth less than $4500, get bad gas mileage, and you had to have owned it and had it insured for at least a year.
So you’ve limited the pool to people who own ten year-old SUV’s and have the cash or credit rating to buy a new car. Talk about niche marketing. From my experience working in a new car dealership buyers trading cars more than ten years-old on new cars were a very small group, well under ten percent of the sales. They are more likely to buy another used car, either for financial reasons or to let the first owner pay the depreciation.
The announcement of the plan may very well have had a similar effect on potential customers in May and June. They waited for the C4C money to become available, putting their purchases off.
Again, your claim doesn’t pass scrutiny. Sales increased in May and June. If people were holding off, we would not have seen an improvement.
At the moment, there is no hard evidence that cash for clunkers increased the overall net business any car company was going to see this fiscal year.
The bean counters at all of the auto makers disagree with you.
Then there are the clunkers themselves. Once turned in the engines are filled with goo and run until useless. The destruction of a useable asset is waste.
Again, we’re talking about vehicles that are ten years-old with a value of less than $4500. The economic value of those engines as used parts is very low, because the price of replacing the engine is close to the value of the vehicle. That means the demand for replacement engines is falling fast, and their value is dropping at a proportional rate.
I’m confident that every junkyard in America had all of the Ford 4.0 liters and Jeep 5.3’s they needed long before C4C.
There’s also a huge environmental benefit in driving old cars into the ground. It takes a lot of fossil fuels to build cars in the first place, from the mining of the ore to assembly to shipping. Fouling the engine means these hulks need to shipped and processed again, using more energy. To the economy, waste is waste.
I’m beginning to question exactly what you really know about economics. You’re not talking about waste – you’re talking about costs. Which costs more: The raw resources of building a new car or the economic costs of not buying new cars, which puts a lot of people out of work and had major ripple effects through the economy.
Here’s a hint: Take what’s behind Door #2.
And, if you still insist on trying to make this case, at least be honest and include the economic benefit of recycling the metal in the clunker.
In terms of stimulus, three billion wouldn’t do a hell of a lot were it injected directly into people’s bank accounts. Current dollar gross domestic product last quarter was $14,149.8 billion, making C4C kind of a drop in the hot tub.
The three billion is leveraged by a factor of 3-5:1 at purchase. It’s projected to cause a 0.5% boost in GDP in the third quarter. If you actually know economics, you know that’s a big return on a relatively small investment.
In the end, though, C.A.R.S has interfered with a market finding a new equilibrium, one in which American’s buy 10 or 15 percent fewer vehicles per year.
There’s this great big lie out there that “markets” are stable and self-correcting. This shows ignorance of all historical evidence to the contrary and the work done in the present from those lessons learned to achieve this.
Let me tell those at the bottom end of the “free market” pyramid scheme a little secret: that “free market” legislation propagated for your mindshare and vote isn’t made to benefit you.
@jkross22: Rewarding people for being responsible is neither fun, nor politically expedient.
Buying a new car, however, is awesome.
Let’s face it: as a group, people are rock-stupid, and don’t know what’s best for themselves. If the human population as a whole wasn’t shortsighted, greedy and under-informed, we wouldn’t have economic-, fuel-, or healthcare-crises ever.
By and large, I agree with the overall assessment. I am really irked, however, by the wanton destruction of usable vehicles, even though there may be tangible reasons to do so. Think of how many poor people with all but dead guzzlers that would be thrilled to get a reliable “clunker” to replace the POS that they hope will last into the next week. Most of those vehicles driven by really poor people are gross polluters, to boot. So, whatever is “lost” in mileage improvements would more be more than offset by lower emissions.
I do have to agree with the author position that the free markets are not always the best way to insure safety, fairness, or sustainability. The historical record of industry and fat cats is well documented.
holydonut :
August 11th, 2009 at 8:57 pm
I just hate how it takes cars that have lots of spare parts and trashes them.
From what I understand, they disable the engine, but the rest of the car can be parted out.
“classic” or cult cars are unlikely to be threatened by this. Most of the cars being traded in are things like old Ford Explorers and Jeep Cherokees, or something with electrical problems so hideous, it cost more to fix than to clunk.
The term “responsible” needs some explanation.
The “responsible” thing to do economically is to make sure everyone is doing something productive, preferably something they’re decent at and don’t hate, all the while making sure the work doesn’t screw over future peeps.
All the other BS about ideology is exact that. You either make economics do something useful for everyone, or it’s worthless.
–
So let’s look at our situation from the criteria above. The currently economic state would make most people want to horde money. Maybe they want and can afford a new car but hey, it’s fair to be cautious in volatile times.
Now think about what happens when everyone actually does this. The guys who makes computers doesn’t buy from the guy who makes cars who doesn’t buy from the dude building pools, etc.
Pretty soon everyone’s out of a job due to lack of demand and then they’re all REALLY cautious about money. Now they’re buying less expensive food, then less food period, collecting welfare, and trying to make that money in the bank last. Of course, there aren’t any new jobs cus nobody’s going to hire in that kind of plunging economy when nobody’s buying.
Note here it’s still basically all the same people, but much much less productive, and there’s precious little the “free market” can do except maybe the guy who was really rich at the start of it all buys everyone else who’s getting poorer due to the cost of living into slavery, which is actually what happened historically (and also ironically why the much hated “socialism” and “communism” gained popularity).
This is essentially the “deflationary spiral” that economists talk about. Ignore it at your own peril.
The C4C is not about fuel efficiency, or even really the economy, it’s about pumping more money into the US auto industry for political reasons.
Giving billions of dollars to people who already have jobs to buy assets they already have is unlikely to pump prime the economy.
Firstly, most people with old cars can’t afford new cars. So it is barely used second cars owned by wealthier people that are traded in.
It doesn’t help the environment, because the other car was barely used.
It drives up the price of old cars, so that poorer people are worse off, and the rebate is of much lower than face value, because the dealers discount less on the purchase price.
It really is what it looks like – paying wealthier people money to buy cars. And borrowing money to do so.
Giving billions of dollars to people who already have jobs to buy assets they already have is unlikely to pump prime the economy.
They’re not going to have those jobs for long if everyone stopped buying.
I’m beginning to question exactly what you really know about economics. You’re not talking about waste – you’re talking about costs. Which costs more: The raw resources of building a new car or the economic costs of not buying new cars, which puts a lot of people out of work and had major ripple effects through the economy.
Really…..?
What happens when car sales are DEAD in the following 3-6 months after C4C is (finally) done for?
As for economics…well here are two key rules:
1. You CANNOT spend your way into prosperity…Joe Biden is a moron for saying that we “must go spend money to keep from going bankrupt”.
-http://www.drudge.com/news/123110/joe-biden-we-have-spend-money-avoid
2. YOU DON’T SPEND WHAT YOU DON’T HAVE! (but that is just common sense…the same common sense that would have never considered a terrible scam like C4C).
As for economics…well here are two key rules:
Economics, ultimately, is not about accounting. Woe be unto the society of fools who think it is.
It’s ultimately about utility of labor and productivity and the quality of life that creates. Everything else is a system of [dis]incentives to make this happen, however formalized.
Oh come on. A bunch of idiots who have driven Envoys, Durangos and Expeditions for the last 10 years now have an excuse to trade them in on a Cobalt, Prius or Focus.
While you sit there in your relatively efficient 330i, Civic Si or WRX. You don’t need $4,500, you have the pleasure of driving a real car that you enjoy.
Let them have their clunker cash. Take heart in knowing these losers are paying it back by buying lottery tickets and cigarettes.
P71: 1. You CANNOT spend your way into prosperity…Joe Biden is a moron for saying that we “must go spend money to keep from going bankrupt”.
-http://www.drudge.com/news/123110/joe-biden-we-have-spend-money-avoid
- Reagan, and Republicans have been saying and doing this for 30+ years. Not, it’s inconvenient for you?
—-
What your saying is A = B. Add to A and you Subtract from B. Economics, with humans involved is not that simplistic, no matter how deeply you wish it to be.
The Author, and everyone here spouting about some Austrian Economist’s blathering doesn’t understand that a Depression is different from a Recession or a Steady State Economy. Economics have moved a long way from 1850. Your next book should be based in reality: Animal Spirits by Shiller.
So, what Crackpot put these words into your mouth? Limbaugh, ORielly, Beck, Palin or Other?
While you sit there in your relatively efficient 330i, Civic Si or WRX. You don’t need $4,500, you have the pleasure of driving a real car that you enjoy.
A 330i I’ll grant you. A civic Si or WRX as a car you enjoy?
Hahahahahaaha….. Pass
Mike999: So what crackpot put your Keynesdroid words in your mouth?
Was it Krugman?
So what crackpot put your Keynesdroid words in your mouth?
People need to realize that NO economy has EVER been successful with Austrian economics. Note that doesn’t mean it’s hasn’t been tried, pretty much any fourth world shithole would serve as an example to others.
Like I said before, this program works for people that have the money to make a payment for a new car along with insurance. The people I know do not have the money for a payment and full coverage insurance. It works for some, not for others. Perhaps thats the point. :-)
Krugman? Mises? am I on TTAC, or what am I on?
Again, moral hazard: those who buy Ford Explorers are allowed to push them onto the dealer lots to pick up a Honda Civic.
My theory is that everyone gets into a Honda eventually, but do we really need the government to bail people out of SUVs and into Japanese compacts?
Excellent article. Minor grammar problem: “Fouling the engine means these hulks need to shipped and processed again”
should be
“Fouling the engine means these hulks need to be shipped and processed again”
RangerM and many others are right. Everyone should really Google “Parable of the broken window.” See Wikipedia. Read it and think about it. This is what CARS is.
@kipling:
Would you also like to complain about business depreciation tax credits?
Sure, put me in charge for a day and all of this crap goes away… flat tax.
Since that will never happen, we have this:
Businesses, successful ones at least, create jobs on an ongoing basis, a tax base and the means for others who don’t start a business to earn a living. These folks should be provided incentives to do this, as it betters the broader community.
And that’s why I still think fondly of Pinto station wagons with the port windows in back.
Everyone should really Google “Parable of the broken window.” See Wikipedia. Read it and think about it. This is what CARS is.
This is true. It’s happened many times in history including to the US economy during WWII.
Apparently not enough thought has gone into this by the austrian school.
Sure, put me in charge for a day and all of this crap goes away… flat tax.
I’ll do you one better: no tax.
See application of this in every undeveloped cease-pool on earth.
@Ranger M, thank you that was enlightening. i always thought about that subject in that way, and I’m delighted to know that there is an actual line of thought behind it.
as for the C.A.R.S program, i guess when looking at it from a political or economically ideological angle a lot of holes can be seen. also the waste factor is also to be considered, not to mention the detriment on the used car market.
however, all modern cars, and I’m talking somewhere in the mid 90s onwards, are manufactured with what seems like a built in timer that is set to start giving you trouble and rendering the cars useless after a certain number of years. that applies to today’s cars as well.
what i think about C.A.R.S is simple, the US new car market needs a jolt, and CARS is it, those who waited for it from may and June still bought a car, maybe a better one than they would have had they not waited for C4C. same applies for those who were inteding to wait a bit longer totrade up their cars.
but in between lies a gray area of people that i think reap the most benefits, those who have never had the oportunity to buy a new car. this gives them this extra benefit of owning a car that meets modern safety and emissions standards, nt to mention the increase in new cars at the detriments of not so dead ones, despite the ecological catch 22 they are causing, is that the more they are, the more modern cars are comaptible in case of crash, not to mention that most will be equipped with driver aids, thus increasing public safety, and giving people an extra hand while recovering from the half spin they went through when Jack Baruth overtook them at 250mph….
every government program has it’s plus and minus, i think C4C has more pluses than minuses, and hell… they are going to spend the money anyway, why not let some of the poor taxpayers benefit from it directly, so at least they feel that their taxes have gone somewhere to start with.
I’ll do you one better: no tax. See application of this in every undeveloped cease-pool on earth.
By ‘undeveloped cess-pool’ I assume you mean the UAE, which is pretty much the exact opposite. Real undeveloped cess-pools like Nigeria feature arbitrary and confiscatory rates (e.g. corporate taxes as high as 85%) and the resultant widespread evasion.
By ‘undeveloped cess-pool’ I assume you mean the UAE, which is pretty much the exact opposite.
Given the intellectual honesty of the austrians, they no doubt attribute the “success” to tax rates.
–
the resultant widespread evasion.
At last someone has the guts to challenge the useless authority of government, unlike their somali neighbors (free market paradise, that). Hope you’re cheering them on.
This is a great topic. I would like to play devils advocate for a bit.
Lets go out on a limb here and say that the c4c provides some ammount of stimulus to the economy. Yes the investment in the program is small. WHERE IS THE MONEY COMING FROM??
The artical in wikipedia “Parable of the broken window” was a good read. It has one MAJOR fault in the theory.
The little boy breaks the window. The shop owner is “Forced to spend”. Lets say the shop owner can not afford the repair bill. Now what? The wind and rain blow in the building until he can AFFORD to fix it!
Can the US afford to stimulate the economy? I am thinking not. That government will borrow its way to third world status (who will “bail out” the US). Or will they just keep printing money? I am canadian eh? Who knows how long it will take but the bubble will burst in time. I hope I am not around.
BTW, here’s a summary of actual tax rates for nigeria, which our knowledgeable “free market” friends decided to nit pick as cover for their ABSOLUTE lack of any success whatsoever.
http://www.nationsencyclopedia.com/Africa/Nigeria-TAXATION.html
I mean, if your closest model countries are doing much worse than the soviet union, that can’t be good.
The artical in wikipedia “Parable of the broken window” was a good read. It has one MAJOR fault in the theory.
Something akin to it is used by the fed reserve system to regulate and stabilize economic activity (ie, the degree of window brokenness).
Parables are kind of meaningless to analyze in and of themselves, and are really only useful to illustrate analogous points.
My first real problem with C.A.R.S.: its effect on market timing. Putting a couple billion dollars on the barrel moves the market to act. The value added to older vehicles made some people move prematurely into the car market; people who might have considered dumping their POS before winter, or next spring. Extra sales made now will not be made later.
Keynes said “In the long run, we’re all dead”. IOW, it makes no sense to say that sales made now won’t be made later – we need the stimulus now.
It also makes no sense, because if the stimulus works, then the economy improves, people go back to work, and car sales improve in the future.
It’s not a zero sum game where all sales made today take away from future sales.
Look past the broken windows, hurdles, and all that for a second.
Consider the teamsters who drive the trucks, add in the “buy American” folks, and the dealers and the dealers’ employees, and throw in the UAW workers.
C4C is throwing a bone to them. Economists and little boys who break windows in parables from Austria, Australian, Milton Keynes, or Key West are not going to account for the votes and campaign support that the Dealers, Teamsters, UAW, etc., will be asked for when the Obama ‘12 campaign gets into gear.
Then there’s the people who will have gotten $3500 to $4500 off the MSRP of their car. Which bumper sticker are they gonna put on it? Do you think it will say “Vote Republican!” ???
That’s what this is about. Factor “Votes” and “campaign support” into your economic formulas and get back to me in a couple of years.
It’s easy to “forget” about a couple hundred bucks tax rebate here and there. It’s a lot harder to “forget” about a $3500 (minimum) kickback from a poltico when you not only see it in your driveway, but you park your fat ass in it and put your coffee in the cupholder.
@ P71_CrownVic:
Really…..?
What happens when car sales are DEAD in the following 3-6 months after C4C is (finally) done for?
Won’t happen. C4C only applies to a very small group of potential new car buyers.
To recap again, to qualify for C4C you have to own a vehicle that gets shitty mileage, is worth less than $4500, you’ve had to have owned and used it for at least one continuous year before trading it in, it has to be owned free and clear of any liens or loans, and you have to be able to afford a new car. Miss any one of those and you don’t qualify.
Buyers that meet all of those qualifications are a very small slice of the new car market. So if their buying drops off after C4C ends it will have very little effect on the overall market. The health of the car market three and six months after C4C will depend on the health of the economy. If people are more confident about their financial position, you’ll see the much larger pool of buyers who didn’t qualify for C4C coming back.
From my experience, I think C4C has stolen more buyers from the used car market, particularly the certified pre-owned market, than future new car sales. If you look at the profile required to buy under C4C, that points strongly toward a used car buyer.
Michael Martineck:
“Combating market forces is
rarelynever the best use of public funds.”There, fixed it for ya’.
Steven Lang:
“We’re also rewarding bad behavior. The only folks who can benefit from this are the ones who bought gas guzzlers. The ones who kept their fuel efficient car maintained well for over 10 years or 200,000 miles will get absolutely no reward whatsoever.”
Count me as one of the no rewards guys. My 2000 Ford ZX2 5 speed (123,000 miles) just got 35+ mpg taking me back ‘n’ forth to work, as calulated after my last fill-up.
Pch101:
“It is only because people have managed to avoid the realities of a worldwide meltdown that we can afford to be so sanguine about it now.”
You points are well made but I have to disagree with you. Just as John Horner states we don’t know if C4C will pull ahead sales now and allow them to crater later, we really don’t know if the western world would have gone into “economic free-fall” and suffered a “hydrogen bomb” like hit without TARP, Porkulus, et. al. We’ll never know. What you state as fact is merely a prediction and an opinion of what might have happened.
d002:
“It really is what it looks like – paying wealthier people money to buy cars. And borrowing money to do so.”
And all in the name of saving the environment – by throwing something away that may still be servicable.
Mike999:
“So, what Crackpot put these words into your mouth? Limbaugh, ORielly, Beck, Palin or Other?”
And what Crackpot supplies your opinion, Mr. Mike? Schultz, Oberman, Moore, or do you just take money from George Soros? Do you really want to go there? Disparaging ones opinion by linking him to your definition of “crackpot” is not what I call the hallmark of good debate. Next time try to win on the merits of your argument, please.
John Horner: And, there is also no hard evidence to the contrary. It always seems strange to me when people make the “no hard evidence” argument against an opposing positing while at the same time not having the corresponding hard evidence to support a contrary view.
That is what I’ve been saying when people proclaim the program as a success.
John Horner: We do know with absolute certainty that the C4C program jump started sales in an industry which had run for over six months at something like 30% below historical sales rates.
But if it merely borrowed sales from the final quarter of the year, then that is hardly an unqualified success.
agenthex: People need to realize that NO economy has EVER been successful with Austrian economics. Note that doesn’t mean it’s hasn’t been tried, pretty much any fourth world shithole would serve as an example to others.
Those countries aren’t using Austrian economics, and any claim that they shows a lack of knowledge about Austrian economics, and how a country’s economic system is influenced by local culture and the attitudes of the citizens to various institutions.
Focusing on tax rates ignores the more important factors of culture (i.e., attitudes toward education, loyalty to clans versus loyalty to a central government); citizens’ attitudes towards government and business; citizens’ tolerance of corruption in government and business; and natural resources available for development.
That goes for Somalia, too, so we can dispense with that red-herring argument as well, even before it surfaces in the discussion. Somalia is NOT a libertarian paradise, and it is not being “governed” according to libertarian philosophy.
agenthex: BTW, here’s a summary of actual tax rates for nigeria, which our knowledgeable “free market” friends decided to nit pick as cover for their ABSOLUTE lack of any success whatsoever.
Nigeria wasn’t being held up as an example of success, so I don’t’ know what the point of that one is. And only the naive really believe that countries such as Nigeria achieve anything close to U.S. levels of compliance regarding the payment of taxes by either individual citizens or businesses.
Getting less fuel-efficient engines off the road has an environmental benefit. There’s also a huge environmental benefit in driving old cars into the ground. It takes a lot of fossil fuels to build cars in the first place, from the mining of the ore to assembly to shipping. Fouling the engine means these hulks need to shipped and processed again, using more energy.
RF, how about an article with links to various sources so we can (attempt to) settle the question of whether keeping an old car on the road is comparable, or better than, the energy/resource requirements for new car manufacture? I believe it is not so.
On to the larger point of whether CFC has worked? I can only say, in my case, I would NEVER have bought a new car if not for the CFC deal working well for me. So you can add at least one new-car buyer to the list that wouldn’t have existed otherwise.
Hard to argue with the point that the program rewards irresponsible people who bought guzzlers in the first place. But in my case, I bought mine used for $3500 and did most of the repair/maintenance work myself. As I have done with all my cars for 12 years. Though we’re a minority in all probability, there must be others like me who were at least responsibly irresponsible.
So, what Crackpot put these words into your mouth? Limbaugh, ORielly, Beck, Palin or Other?
It is the simple, common sense truth.
By Biden’s (il)logic, California should be the richest state in the nation.
We’re also rewarding bad behavior. The only folks who can benefit from this are the ones who bought gas guzzlers.
How is it bad behavior? They bought what they wanted with their own money.
You want bad behavior? How about lying to the American people that their way of life is murdering this planet and the only way to fix that is to drive small, cracker box cars and have curly light bulbs.
That is bad behavior/
@ dingram01
…(attempt to) settle the question of whether keeping an old car on the road is comparable, or better than, the energy/resource requirements for new car manufacture?
I’ve tried a number of times to respond to THAT particular red-herring, but for no success.
As a quick summary; over the average lifetime of the average car, ~80% of the energy in the vehicle’s life-cycle is as fuel to run it. After about 8 years, you only need about a 10% improvement in fuel efficiency to make switching to a brand new car the less energy intensive choice.