Is it just me or does anyone else think this cash for clunkers program is a waste of good taxpayer money? Is this program really generating more car sales or is it just pulling demand forward? The Wall Street Journal had an excellent story today about the program which was written by Jeremy Anwyl who is CEO of Edmunds.com (a wonderful online car buying guide).
Mr. Anwyl presents some interesting research to support the idea that this program likely did not actually increase sales. He makes the case that many buyers delayed purchasing until the program was launched. He also makes the case that future sales will be reduced because many buyers simply purchased now instead of later (i.e. demand was pulled forward).
What this program really shows is that with enough government subsidies, consumers will spend. But did this program really generate any value? Did we not just take from one taxpayer and give to another taxpayer? I guess if we as a country are comfortable with borrowing more money, we could subsidize many other industries (besides banks, auto companies, real estate, name your favorite industry…).
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Cash for clunkers
Hard to say if it generated value. If the government did nothing and just let the recession run its course we could be mired for years. Then GM and Ford would go out of business because they can’t wait for sales forever. And their suppliers. And all of the businesses that sell to their employees. Future sales can really be reduced if the manufacturer is insolvent. Three billion (about $20 per taxpayer) to save a million jobs is pretty reasonable, if that’s what it’s doing. Sooner or later we have to get back to manufacturing and it’s a lot cheaper to give automakers support now than to start up an auto industry from scratch.
There probably was a better way. But none of the opponents suggested one. They just complained. Worse than useless. I just want to get out of the recession and don’t care about the political affiliation of the ones who make it happen.
The economy is, after all, just a wager on future profitability. It’s not going to get better until people spend. And they’re not going to spend until they believe it’s going to get better.