As loyal readers/listeners know, and as discussed on the most recent episode of The Riff, I’m more than a little confused about this “Cash for Clunkers” program and its unexpected popularity. I don’t know the restrictions or objectives or the measurements for success, don’t know who it’s supposed to benefit or how long the program should ideally run.
In my (admittedly half-assed) search for answers, I came across this article in which Reuters blogger James Pethokoukis argued that Cash for Clunkers should be discontinued. His contention was that the program isn’t increasing sales, only hurrying the timing of what would have eventually been new vehicle sales whether there was a rebate or not.
I’m not doubting the analysis cited by the experts in the article, but Pethokoukis’s conclusion has only left me with more questions.
Three questions, to be exact. Want to hear them? No? Too bad, here they come.
1. If we’re having a conversation about Cash for Clunkers, shouldn’t we at least mention the obvious environmental benefit? I’m not saying it should be the lone factor in judging the program’s effectiveness, but ignoring it completely seems a bit unfair and obtuse.
2. Isn’t speeding up the timing of sales a good thing, at least in an indirect way? Let’s say the driver of an old VW bus has planned to wait two years before trading in his molestermobile for a Prius. Due to this program, he expedited the process and bought this week. Doesn’t that mean he’ll have to purchase his next automobile two years sooner? And won’t such expeditation (warning: not a real word) result in higher car sales in the long run?
3. Let’s say the analysts are right that the auto sales numbers won’t be affected in the long run. So they’ll be a bit higher than expected now, and adversely lower in the near future. Well…so? Isn’t that kind of the point of economy jump-starter programs like this?
We all know the market will stabilize soon. It always has. My understanding is the point of programs like this is to increase near-term sales to spur the economy on the whole, if perhaps skewing the results of this particular industry.
If you think of this as a macro-economic solution rather than focusing on just the auto sector, doesn’t a quick fix to help accelerate the economy’s recovery sound like a good thing? Shouldn’t the news that sales have skyrocketed be seen as a positive?
As previously noted, and as evidenced by my abundance of questions above, I don’t know a ton about this program. Just think that the old “it’s costing the taxpayers money!” might not be considering the full story here. But what else is new.