Most Replaced Clunker With … Another Guzzler

According the Associated Press:

The most common deals under the government’s $3 billion Cash for Clunkers program, aimed at putting more fuel-efficient cars on the road, replaced old Ford or Chevrolet pickups with new ones that got only marginally better gas mileage, according to an analysis of new federal data by The Associated Press.

Did the stimulus work?

Jeffrey Miron and Russ Roberts tackle the question of whether or not the stimulus worked. Their answer? Not quite.

Miron:

Research finds more evidence for the efficacy of monetary as opposed to fiscal policy in ending recessions. And the studies on fiscal stimulus have shown more impact from tax cuts than from spending increases.

We also do not know whether the positive G.D.P. growth resulted partially or mainly from natural equilibrating mechanisms, rather than from monetary or fiscal policy. Much discussion of the recession presumes it will end only because government comes to the rescue.

In fact, the U.S. economy recovered from significant recessions before 1914, when monetary and fiscal policy had not even been invented. Economies can and do recover on their own, and intervention might make things worse by generating uncertainty and distorting the economy’s allocation of resources.

Roberts:

I once thought that spending money was the government’s strong suit. But as of October 20, only $120 billion of the $290 billion available so far from the stimulus package has been spent. Despite the early rhetorical emphasis on shovel-ready projects, the Department of Health and Human Services, the Department of Labor, and the Department of Education accounted for two-thirds of the total spent.

The Department of Transportation, a source of spending that is likely to be rich in shovels, has $30 billion available but has only managed to spend $4 billion. So perhaps it is not surprising that construction workers and manufacturing workers (who make up half of the job losses since the beginning of the recession) are struggling to find jobs.
I think the Keynesian narrative is right about one thing — consumers lack confidence. The crucial question is whether a large increase in government spending financed with borrowed money that swells the deficit to $1.4 trillion is good for confidence or bad for it. No one knows the answer.

The arguments against the stimulus are rooted in basic economics. Unfortunately, basic economics rarely make for an inspiring campaign speech.

August Auto Sales: Foreign Domination

So what has been the effect of the Cash for Clunkers program?

(Click to enlarge)

Click here for the original data.

HT: EconomPic

Cash for Clunkers Destroys Perfectly Good Cars

Brad Smith at Division of Labor writes:

Thanks to the glories of YouTube, we can watch as the government mandates the destruction of perfectly good automobiles to “help the economy.” Here is a very nice 1990s Dodge Dakota 4X4 being destroyed. It is a much better vehicle than my pick up truck.

This is a Corvette that looks to be in pretty good condition. Black, pretty sharp car. I’m sure there are a lot of young men crammed into 2001 Malibus who would have liked this car.

In this video, a ’98 Cadillac DeVille with less than 80,000 miles meets its end. Just 68,000 miles on this Chevy Caprice wagon.

A nice looking 2001 Mazda light truck with 75,000 miles bites the dust here. Here’s a good looking Volvo prematurely destroyed. This SUV would look at home in any tony U.S. suburb.

Really, you ought to look at at least a couple of these videos, and the hundreds more like them on YouTube. Are these “clunkers?” Can it really help the economy to destroy perfectly good assets? Are the people running the government the most economically illiterate bunch since FDR ruled the roost? Or are they dumber?

AP: Cash For Clunkers To Be Suspended

AP reports:

The White House said Thursday it was reviewing what has turned out to be a wildly popular “cash for clunkers” program amid concerns the $1 billion budget for rebates for new auto purchases may have been exhausted in only a week.

Transportation Department officials called lawmakers’ offices earlier Thursday to alert them of plans to suspend the program as early as Friday.

Clunker Replacements Are Mostly Japanese

According to Newser,

The “cash for clunkers” program might be a boon for car dealers, but for American automakers the news isn’t so good—four of the five top-selling cars in the program are Japanese. While the Ford Focus is the No. 1 seller, Toyota and Honda occupy the next four spots. The new vehicles get an average of 25.4 miles per gallon, while the traded-in cars—more than 80% of which were trucks and SUVs—get just 15.8 mpg.

Good, there is nothing wrong with that. Americans deserve the freedom to buy whatever cars they please–they are adults. That should not be a radical statement, yet sadly it is.

And since Japanese cars are cheaper (not to mention better), more money will remain in Americans’ wallets to buy other American products. New industries will grow.

Question: What will the Japanese manufacturers do with the dollars they receive from American buyers?

Answer: They will spend it on American products, where dollars can be spent. Again, new–and efficient–industries will grow.