Last week marked the end of the Cash for Clunkers program. Many have called it one of the best economic stimulus programs ever implemented. Of course the White House has called it “Wildly Successful.”
“This is one of the best economic news stories we’ve seen and I’m proud we were able to give consumers a helping hand,” said US Transportation Secretary Ray LaHood.
The White House Council of Economic Advisers, released preliminary analysis on the program:
1. Their analysis estimates that the program will boost Q3 economic growth by 0.3-0.4 percentage points because of resultant automobile sales in July and August.
2. The program will sustain the increase in Q4 GDP because auto production will continue in order to replace depleted showroom inventories.
3. Clunkermania will create or save 42,000 jobs in the second half of 2009. It is further expected that those jobs will remain well after the program’s close.
The program, combined with earlier economic stimulus, has second half economic growth coming on strong.
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A significant problem is that the people who would have bought their cars in the 4th quarter or next year have already done so. Canabalizing future sales is not stimulus. Destroying property never, under any circumstances, creates wealth. The people who bought under the clunkers program definitely made out. They got a benefit, but it was at expense of everyone else who did not need a new car at this time.It is merely another central planning boondoggle.
As far as the 4th quarter growth, that remains to be seen. It will be an interesting show.