Monday, November 2, 2009

“Cash for Clunkers” cost taxpayers more per vehicle that the average $4,000 rebate given.

Last week it was reported that the United States economy saw a 3.5% growth and the stock markets rallied at the start of the week only to crash toward the end of the week as investors are concerned by "measures expire, high unemployment and weak consumer spending…" (http://www.sanluisobispo.com/topnews/story/905812.html). Part of the reason the United States economy grew during the third quarter was on the shoulders of the "Cash for Clunkers" success. Or was the program a success and good use of taxpayer money?

Edmunds.com did an analysis of the 690,000 new vehicles that were sold under the "Cash for Clunkers" program. The rebate program cost the American taxpayer $3 billion with an average rebate of $4,000. Edmunds compared sales of luxury cars and other vehicles not included in the "Cash for Clunkers" program then used "traditional relationships between sales volumes of those vehicles and the types of vehicles sold under Cash for Clunkers" (http://money.cnn.com/2009/10/28/autos/clunkers_analysis/?postversion=2009102910). Based on that formula, Edmunds.com believes that all "but only 125,000 of those vehicles that would not have been sold anyway" (http://money.cnn.com/2009/10/28/autos/clunkers_analysis/?postversion=2009102910). That translates to an average rebate of $24,000 not $4,000.

Bill Adams slams Edmunds.com, "It is unfortunate that Edmunds.com has had nothing but negative things to say about a wildly successful program that sold nearly 250,000 cars in the first four days. There can be no doubt that CARS drummed up more business for care dealers at a time when they needed help the most." The biggest winners in the "Cash for Clunkers" program was not the taxpayer or the United States economy; rather it was the foreign automakers as they had 7 of the top 10 vehicles purchased. September saw a hangover as car sales were only 9.2 million compared to 10.2 million the year before.

The "Cash for Clunkers" did assist in clearing inventories thus causing a need for future production but will it be enough to kick start the economy as Retailers are worried already about the Christmas season. Looking at Michigan where the "Big 3" automakers call home, it does not appear that it has kick started anything as the unemployment rate has hit 15.9% and is still rising (http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=LASST26000003). When will Congress understand that the number one way to spurn sustained growth in the economy is job creation that is not tied to Federal dollars that will only place the burden on the states in which the jobs were "saved"? Printing and borrowing money will not improve our economy in the long run. President Obama is looking to end health care reform with his administration but he is doing it at the cost of the American economy.

It is time for smaller government and an elimination of the Federal Reserve as they perform only lip service to sustain improvement in our economy.