Here's a Clunker of a Program

Remember the Cash for Clunkers program? This was the part of the stimulus package that offered a $4500 government check for car buyers who traded in an old car for a newer, more fuel efficient model. A wildly popular program, Cash for Clunkers handed out $4 billion in tax payer money between late July and early August.

In addition to the “green” benefits of getting more fuel efficient cars on the road, the program was primarily intended to boost sales in the auto industry. And it worked, right? Car sales surged in August. So the program was a success.

Well, not so fast. You see, everyone who traded in an old vehicle for a new car got the cash rebate. But most of those people would have bought a new vehicle even without the government check that call along with it. The measure of how successful the program was should be the number of people who bought a new car that would not have made the purchase without the Cash for Clunkers program.

The automotive site Edmunds.com did the analysis to figure out how many people bought a car specifically because of the rebates. Their estimate of the number of additional buyers was only 125,000 out of the 690,000 total cars sold during the program. That means that the government subsidy per additional car sold was (drum roll, please) … $24,000.

For the folks who bought the cars, the government rebate was a great deal. In terms of stimulating the economy, not such a great deal. That would be bad enough if it was the end of the story. But as the telemarketeers say, “wait, there’s more!”

Car sales surged in August, good news for the economy. But then car sales collapsed in September, bad news for the economy. August sales were about one and a quarter million vehicles, and September was about 40% less, at seven hundred and fifty thousand. It doesn’t take a rocket scientist to realize that most, is not all, of the surge in business during August was comprised of buyers who would otherwise have waited until September to buy a new car.

To me, it sure looks like the government borrowed $4 billion from the Chinese and handed it out to car buyers for a net increase in new car sales of zero. Zip. Nil. Big goose egg.

But hey, that’s okay. I won’t mind eventually seeing my taxes go up to pay for this. After all, I’m getting my share. You see, I bought a new air conditioning unit last August when the old one on my house died. I would have ponied up the money for one anyway. Remember, it was August. Hotter than the hinges of hell. I wasn’t going one week without AC. Only, now, I qualify for a $1500 tax credit for buying an Energy Star rated appliance, courtesy of the Obama stimulus package. Woo-hoo! Spend that money!

I can’t wait to see what those brainiacs in Washington come up with for an encore.