pageok
pageok
pageok
Clunk:

"Cash for Clunkers" is an amazingly successful stimulus program, right? How else to explain its immense popularity? Not so fast.

Congress budgeted $1 billion to to provide car-buyers of rebates up to $4,500 when trading in a qualifying older vehicle for a new, more fuel-efficient one. The money was supposed to last into November, but it's already gone. Does this mean it worked? Not necessarily. As Jeremy Anwyl of Edmonds.com explains, it appears the program shoe-horned months worth of car sales into a week or two, and may not have increased overall car sales much at all.

I love a good sales surge as much as anyone. But it's not that simple. First, it's not clear that cash for clunkers actually increased sales. Edmunds.com noted recently that over 100,000 buyers put their purchases on hold waiting for the program to launch. Once consumers could start cashing in on July 24, showrooms were flooded and government servers were overwhelmed as the backlog of buyers finalized their purchases.

Secondly, on July 27, Edmunds.com published an analysis showing that in any given month 60,000 to 70,000 "clunker-like" deals happen with no government program in place. The 200,000-plus deals the government was originally prepared to fund through the program's Nov. 1 end date were about the "natural" clunker trade-in rate.

Clearly, cash for clunkers was underfunded from the start. Consumers quickly figured that out and rushed to take advantage before funding ran out.

This sales frenzy was inevitable. We have crammed three to four months of normal activity into just a few days.

While automakers may like the program, there's little reason to believe it will contribute to an economic recovery -- and even less reason to think the program needs another $2 billion, as approved by the House of Representatives. More from the WSJ and Derek Thompson.

86 Comments

Clunk in the Dark:

The Associated Press reports:

The Obama administration is refusing to quickly release government records on its "cash-for-clunkers" rebate program that would substantiate — or undercut — White House claims of the program's success, even as the president presses the Senate for a quick vote for $2 billion to boost car sales. . . .

The Associated Press has sought release of the data since last week. Rae Tyson, spokesman for the National Highway Traffic Safety Administration, said the agency will provide the data requested as soon as possible.

DOT officials already have received electronic details from car dealers of each trade-in transaction. The agency receives regular analyses of the sales data, producing helpful talking points for [Transportation Secretary] LaHood, White House spokesman Robert Gibbs and other officials to use when urging more funding. . . .

LaHood, the program's chief salesman, has pitched the rebates as good for America, good for car buyers, good for the environment, good for the economy. But it's difficult to determine whether the administration is overselling the claim without seeing what's being sold, what's being traded in and where the cars are being sold.

LaHood, for example, promotes the fact that the Ford Focus so far is at the top of the list of new cars purchased under the program. But the limited information released so far shows most buyers are not picking Ford, Chrysler or General Motors vehicles, and six of the top 10 vehicles purchased are Honda, Toyota and Hyundai.

Meanwhile, James Hamilton compares "cash-for-clunkers" to the Agricultural Adjustment Act.

UPDATE: Andrew Sullivan also likens "cash-for-clunkers" to FDR-style policies, and thinks this is a reason the program should appeal to limited-government types. Matt Welch responds. My take: There are many reasons to doubt the GOP's commitment to a limited-government agenda, but opposition to cash-for-clunkers ain't one of them.

56 Comments

Clunkers without Cash:

Dealers in various states, including New York and New Mexico, have decided to withdraw from the "cash for clunkers" program due to delays in government reimbursements -- and perhaps not a moment too soon, as the Department of Transportation announced the program would end Monday (two months early) because it's again out of cash.

27 Comments

Clunk . . . Crash?

The federal government has enlisted employees of the Federal Aviation Administration's air-traffic control unit and various federal contractors to help clear the backlog of "cash-for-clunker" rebates owed to auto dealers, according to this report.

An FAA memo obtained by The Washington Times reads in part:

"We have been asked to provide volunteers to assist with this high-visibility program … employees may work during regular business hours (providing mission allows) and/or overtime.

"The [Air Traffic Organization] has been asked to provide a list of 100 employees to assist. They will be asked to attend a two-hour training course this afternoon. The task is expected to take 5 to 10 days."

But Ms. Zuckman said that only support personnel, such as in finance and operations, were asked to work on the clunkers program.

"Nobody is being ordered to do anything; we weren't asking air traffic controllers to leave their posts. We're using budget and accounting people primarily," she said.

"It was made clear that no core mission activities of the FAA are to be affected by this effort, especially as they could relate to air traffic operations."

When the program was created, the federal government promised to repay dealers within seven days, yet as of last week only 7 percent of all claims had been paid. Moreover, some dealers are finding their claims rejected without explanation, according to this report (to which I linked last week).

Laura Sodano, a sales manager at Curry Chevrolet in Scarsdale, N.Y., said dealers were not told why their applications had not been approved and were having to review the entire form to determine what went wrong.

"I don't know one dealership that's gotten paid yet," Ms. Sodano said. "If they run out, we're in trouble. It's bringing us a lot of traffic, but it's not a very good program."

Among consumers, the program has created far more interest than experts had predicted. It was initially given $1 billion of funding, enough for about 250,000 sales, and an end date of Nov. 1. That money was used up in a little more than a week, and Congress quickly approved $2 billion more to extend it.

Transportation officials say they believe reimbursement requests of about $400 million on completed sales have yet to be filed, leaving about $600 million in credits still available for the final weekend, after removing $100 million for administrative costs.

If the funding is exhausted before all reimbursements are made, some dealers — and possibly G.M. — could end up having to write off the unpaid credits. The administration does not plan to seek a third installment of funding.

More from AllahPundit.

55 Comments

Clunk Confirmed:

A new paper in The Economists' Voice concludes that the costs of the "cash for clunkers" program exceed the benefits by approximately $2000 per vehicle. Meanwhile, September auto sales are plummeting, leading to estimates the monthly total will be the lowest in nearly three decades.

50 Comments