Friday, June 4, 2010

Chart of the Day: Cash for Clunkers

The proof is out, when Government gets involved, they do stupid things in the name or helping the downtrodden. Another example, among many, of a government program costing us, the taxpayers, a bundle, and accomplishing nothing. The administration didn't even take into consideration that the timing coincided with normal end of year sales; or did they. Since Government Motors was relieved of having to offer end of year incentives, this makes the "labor union bailout travesty" look better.

Which do you vote for, dumb or sly?

Excerpt: The data show that the government stimulus did increase sales — but that the following month, sales dropped in proportion to the spike. The three-week incentive program simply moved sales from the future into the present, and did nothing to increase organic demand even in a relatively short run. Sales had already begun to rebound in the spring, even with the Cash for Clunkers proposal moving through Congress.

What this chart doesn’t show is the poor timing of the program. C4C hit as dealers would have been discounting vehicles anyway, in order to make room for the new models that arrive in September. Instead of hitting the point where demand might flag, the C4C program overlaid an incentive-rich period in the sales cycle for auto dealers. That killed demand when the new models did arrive, which likely forced dealers and manufacturers into pushing hard on incentives that may not have been needed otherwise.

Some may say that the intervention didn’t hurt sales, either, so the effort was a wash. However, the government spent several billion dollars on incentivizing people who would have bought anyway, money we don’t have, thanks to our massive budget deficits. Instead, we borrowed the money and will have to repay it — as well as pay the interest on the bonds over the next several years. We got nothing for a whole lot of something, which is why we abandoned Keynesianism in the 1970s as well. Hot Air: Chart of the Day: Cash for Clunkers

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