Cash-for-Clunkers is Working, Give the Gov’t Credit
There has been a lot of discussion, and spin, going on about the Cash-for-Clunkers program. And it’s unfortunate that the only “journalist” who can cut through all the b.s. is John Stewart.
The program has been an unlikely success, both on the economic and environmental fronts, and Republicans won’t allow the government to show it can do what it’s supposed to do: govern. I had hoped President Obama’s election would thrust us into an era of politics where the government was seen as a partner to citizens, who ultimately are the shareholders in such a vast organization. That hasn’t happened…yet.
Here’s what’s really going on with the Cash-for-Clunkers program.
Economists and policy makers under-estimated the attractiveness of the scheme. Other countries have already introduced such a program and seen positive results. Germany was among the first to put forward such an exchange and its auto sales rose by nearly a quarter year-over-year. Auto sales rose on a year-over-year basis in France, Italy and South Korea in July as their programs showed they were viable, while Japan and Spain reported smaller declines in sales.
Marc Chandler, senior currency strategist at Brown Brothers Harriman in New York said U.S. auto sales hit a surprising 11.3 million annual unit pace in July, besting expectations of a 10.2 million unit rise. Sales stood at 9.7 million in June. Ford car sales rose 2.4% for the company’s first increase in nearly 20 months. One published report quoted a General Motors official estimating that the clunker program generated about 118,000 sales–86,000 directly with the program and another 33,000 from people drawn to the dealerships by the program.
One interesting point: American automakers, though accounted for less-than-half of the sales under the cash-for-clunker program in the applications processed until the end of July. But what that doesn’t include is all the foreign auto producers who are based in the United States and employ American workers, so it is still a boon to our country.
Another interesting detail is that some 47% of the clunker-for-cash deals were accounted for by companies, not households.
The House of Representatives voted last week to fund the cash-for-clunker program with another $2 billion. The Senate is poised to follow suit. If the Senate chooses to change details in the bill, though, any cash infusion would have to come after both bodies return from their summer recesses. Let’s hope they play nice after their time off.
Chandler of Brown Brothers Harriman said the rise in auto sales will have a positive impact on a number of economic reports, including retail sales and personal consumption. “Increased auto production will also impact industrial output–not just for autos, but also for steel and other industries, paints, plastics, etc, that feed into the auto industry,” he said.
The clunkers program is also helping out the environment, although modestly. Time.com reporter Bryan Walsh filed a report that said:
The clunkers averaged 15.8 m.p.g., compared with 25.4 m.p.g. for the new vehicles purchased, for an average fuel-economy increase of 61%. On the whole, American drivers are trading in inefficient trucks andSUVs for much more efficient passenger cars. Car manufacturers like Nissan are already retooling some models to improve their fuel economy so they can qualify for the credits. The early numbers were enough to convince California Senator Dianne Feinstein to go from criticizing cash for clunkers as too lax to supporting additional funding for the bill in the Senate. “This program has done much better than we ever thought it would for the environment,” she told reporters on Aug. 4.
Let’s keep it coming!
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