Closing the Loop on Cash for Clunkers

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More than 700,000 vehicles were sold in the U.S. as part of the $2.90 billion CASH FOR CLUNKERS program. Many on the left (and sadly a few on the right) labeled this program a success because Americans predictably took the free money. But the numbers for September are now in. U.S. auto sales declined by 23% last month. GM and Chrysler led the way in declines with 45% and 42% respectively. Honda sales declined 20%, Toyota 13%, and Ford 5%.

This was a no-brainer. During the CARS program, Democrats proclaimed that the spike in sales was evidence that the economy was turning around. U.S. Transportation Secretary Ray LaHood referred to it as a “wildly successful run.” Some auto executives even announced plans to INCREASE production next year to meet an anticipated long-term rise in vehicle demand. The CASH FOR CLUNKERS program only proved one thing—people like free money.

Look at it this way: Three groups of people participated in the program: 

  1. For people who would have traded in their cars anyway, the government payment was a giveaway that had no effect on purchase behavior anyway.
  2. For people who would not have traded in their cars without a subsidy, the program encouraged them to buy or lease a car they might not have been able to afford without Washington providing the down payment. Expect many of these folks to unload their cars during the next year.
  3. For people who would have traded in their cars in the next few months anyway, the program encouraged them to buy now instead of later. One month’s sales increase became the next month’s sales decline.

We can now confirm that there were many buyers in the third group. There is still no evidence that the program will have any long-term positive effect on auto sales, and I don’t expect any to be forthcoming. The bottom line is simple: Government stimulus programs don’t work.

By the way, another government giveaway is on the way. Consumers will get $50-200 of government money if they trade in their own appliances for new ones. Expect appliance sales to increase during the program, and then dip markedly when the free money ends. Also expect left wingers to applaud the program during the sales spike, but move on to other topics during the subsequent decline. Another $300 million down the drain.

7 Comments

7 Comments

  1. jeff  •  Oct 2, 2009 @11:07 AM

    and if they really study the effects of this it was probably an environmental loser as well….

  2. alex  •  Oct 2, 2009 @6:56 PM

    It’s not even worth debating the environmental side of the program. Paying $3 billion to get people to trade for new cars that get a little better mileage is ridiculous. It’s like paying someone $200 an hour to pick up trash by the highway, a total waste of money. This really had nothing to do with the environment anyway. It was all about the unions and pumping $ into GM.

  3. jeffo  •  Oct 3, 2009 @10:52 AM

    The sickest part of it all is that some of the politicians will campaign for re-election on “I supported the successful cash for clunkers program while my opponent voted against it”.

  4. proudlefty  •  Oct 5, 2009 @7:22 AM

    This is why you will never get the white house again. You don’t want to spend any money to help real people. Working people can’t afford cars in the Bush economy. At least Obama is trying to help real people.

  5. GaryG  •  Oct 5, 2009 @9:37 AM

    Guess what Lefty? There’s not much more you can tax from the rich, which is why Obama is now thinking about a VAT to soak REAL PEOPLE. So real people will pay for their own programs and the bureaucracy, like it or not. I guess the economy will be Bush’s until it get’s better, and then it will be Obama’s economy.

  6. jeffo  •  Oct 5, 2009 @3:27 PM

    Proudlefty…study up on your basic economics. Tax and spend government, subsidies and the like end up hurting everyone, especially the middle class and poor. The tragedy of it is that people like you fall for it again and again.

  7. jeff  •  Oct 9, 2009 @1:15 PM

    thats why i want the collapse…all the lefty leeches can go live on one side of the planet and smoke their doobies and live in their filth…gimme gimme gimme