My last post about "Cash For Clunkers" was on October 8.
On Thursday, there was an interesting story on CNNMoney.com concerning a sales analysis of the Cash For Clunkers program. It can be found at this link:
http://money.cnn.com/2009/10/28/autos/clunkers_analysis/?postversion=2009102910
Here are some excerpts that are particularly notable:
"A total of 690,000 new vehicles were sold under the Cash for Clunkers program last summer, but only 125,000 of those were vehicles that would not have been sold anyway, according to an analysis released Wednesday by the automotive Web site Edmunds.com."
and later in the article:
"The average rebate was $4,000. But the overwhelming majority of sales would have taken place anyway at some time in the last half of 2009, according to Edmunds.com. That means the government ended up spending about $24,000 each for those 125,000 additional vehicle sales."
and later in the article:
"In order to determine whether these sales would have happened anyway, Edmunds.com analysts looked at sales of luxury cars and other vehicles not included under the Clunkers program.
Using traditional relationships between sales volumes of those vehicles and the types of vehicles sold under Cash for Clunkers, Edmunds.com projected what sales would normally have been during the Cash for Clunkers period and in the weeks after.
Edmunds.com's estimate of the ultimate sales increase generally matches what industry experts had thought, said George Pipas, a sales analyst with Ford Motor Co (F, Fortune 500)."
SPX at 1036.19 as this post is written
Showing posts with label "Cash for Clunkers". Show all posts
Showing posts with label "Cash for Clunkers". Show all posts
Sunday, November 1, 2009
Thursday, October 8, 2009
"Cash For Clunkers" Revisited
Here is an October 5 Wall Street Journal editorial reviewing the "Cash For Clunkers" stimulus plan:
http://online.wsj.com/article/SB10001424052748703628304574453280766443704.html
Also, to provide perspective, a chart of Vehicle Sales from the CalculatedRisk blog (10/1 post) at this link:
http://www.calculatedriskblog.com/2009/10/light-vehicle-sales-92-million-saar-in.html
As one can see, the "Cash for Clunkers" seems to have been successful in temporarily causing a surge in auto sales for July and August.
One could casually observe that the program was successful, in that it caused a short-term sales spike and the purported associated economic and environmental benefits.
However, this observation would be flawed, as many other factors are present as well. I mentioned some of them during my August 4 post.
SPX at 1057.58 as this post is written
http://online.wsj.com/article/SB10001424052748703628304574453280766443704.html
Also, to provide perspective, a chart of Vehicle Sales from the CalculatedRisk blog (10/1 post) at this link:
http://www.calculatedriskblog.com/2009/10/light-vehicle-sales-92-million-saar-in.html
As one can see, the "Cash for Clunkers" seems to have been successful in temporarily causing a surge in auto sales for July and August.
One could casually observe that the program was successful, in that it caused a short-term sales spike and the purported associated economic and environmental benefits.
However, this observation would be flawed, as many other factors are present as well. I mentioned some of them during my August 4 post.
SPX at 1057.58 as this post is written
Thursday, August 6, 2009
Coming Soon - "Cash for Sneakers"?
Perhaps some have seen a recent Wall Street Journal editorial that commented on the economics and logic of the "Cash for Clunkers" program; it is subtitled "Let's have a $4,500 subsidy for everything" and can be found here:
http://online.wsj.com/article/SB10001424052970204313604574326531645819464.html
In one of the articles I have written, titled "Intervention's Potential Blindspots" which is listed halfway down the Directory Of Articles.
I wrote the following concerning stimulus and intervention programs (point #8):
Setting of precedents – Originally the bailouts were directed toward major banks and brokers under the pretense of having to protect the integrity of the overall financial system. However, as time has gone on, the recipients of aid has expanded into other areas. As the list of recipients widens, so does the rationale for providing more aid…as does the list of those expecting aid. Thus a vicious circle arises. If taken to extremes, basically any business or economic entity could claim duress because of poor economic conditions, and thus need – as well as claim entitlement for – aid. Some of the current arguments for providing intervention are exceedingly convoluted and weak. Despite these shortcomings, they are being given credence (and in many cases funding), thereby establishing a weak argumentative standard that can be copied and exploited by other parties. The mere fact that certain of the arguments are so fatuous relatively early in the “entitlement” cycle bodes very poorly, signaling that by the aforementioned vicious cycle effect the entitlements “spectrum” may prove to be very wide.
_______
Unfortunately, the entitlements spectrum is "widening" as time goes on, as mentioned in my article. Which leads one to wonder how, or if, the stimulus entitlements spectrum will be limited.
Recently I saw the phrase "Cash for Sneakers" mentioned ~
SPX at 999.69 as this post is written
http://online.wsj.com/article/SB10001424052970204313604574326531645819464.html
In one of the articles I have written, titled "Intervention's Potential Blindspots" which is listed halfway down the Directory Of Articles.
I wrote the following concerning stimulus and intervention programs (point #8):
Setting of precedents – Originally the bailouts were directed toward major banks and brokers under the pretense of having to protect the integrity of the overall financial system. However, as time has gone on, the recipients of aid has expanded into other areas. As the list of recipients widens, so does the rationale for providing more aid…as does the list of those expecting aid. Thus a vicious circle arises. If taken to extremes, basically any business or economic entity could claim duress because of poor economic conditions, and thus need – as well as claim entitlement for – aid. Some of the current arguments for providing intervention are exceedingly convoluted and weak. Despite these shortcomings, they are being given credence (and in many cases funding), thereby establishing a weak argumentative standard that can be copied and exploited by other parties. The mere fact that certain of the arguments are so fatuous relatively early in the “entitlement” cycle bodes very poorly, signaling that by the aforementioned vicious cycle effect the entitlements “spectrum” may prove to be very wide.
_______
Unfortunately, the entitlements spectrum is "widening" as time goes on, as mentioned in my article. Which leads one to wonder how, or if, the stimulus entitlements spectrum will be limited.
Recently I saw the phrase "Cash for Sneakers" mentioned ~
SPX at 999.69 as this post is written
Wednesday, August 5, 2009
Another Underexplored Facet of Stimulus Programs
One of the criticisms I have read of the "Cash for Clunkers" stimulus is that the program is poorly administered.
It seems disconcerting that such a seemingly simplistic program like the "Cash for Clunkers" program is poorly administered. One is led to wonder how more complex programs will be managed.
The effectiveness, and efficiency of how stimulus is administered is very important yet rarely discussed.
SPX at 998.59 as this post is written
It seems disconcerting that such a seemingly simplistic program like the "Cash for Clunkers" program is poorly administered. One is led to wonder how more complex programs will be managed.
The effectiveness, and efficiency of how stimulus is administered is very important yet rarely discussed.
SPX at 998.59 as this post is written
Tuesday, August 4, 2009
"Cash for Clunkers" Is A "Junker"
"Get your share of the stimulus!" is a slogan that has typified the auto dealer advertising for the "Cash for Clunkers" program.
For many reasons, I think that the "Cash for Clunkers" program is highly flawed on an "all things considered" basis and should have never been legislated.
Without writing a "book" on the subject, here are a few of my thoughts....
First, as a stimulus program it carries all of the potential risks and unintended consequences of intervention programs, of which I have previously written. These potential risks and unintended consequences should not be overlooked.
Second, the specifics of this "Cash for Clunkers" program carry an array of troubling aspects...
Like most stimulus programs, "Cash for Clunkers" has a thin "veneer" of seeming benefit - until one starts analyzing the program in totality. In this case, the "veneer" is that the program appears to be a "win-win-win" situation - from an environmental perspective, older cars with relatively poor fuel efficiency (and concomitant emissions) are taken off the road; from a consumer perspective, the auto buyer is given "a break" in the form of the reduced purchase price; and from an automaker / GDP perspective car sales increase. So far the government has allotted $1 Billion for the program and is contemplating an additional $2 Billion.
Here are some problems specific to the program, when one views it on an "all things considered" basis:
As some people have mentioned, car sales are being "borrowed" from the future. This is a major issue.
Although automakers are making sales, they are doing so at a discount. Discounting holds many risks from a business perspective; these risks should be known by automakers as it has been a serious industrywide problem in the past, especially for those automakers that have abused the practice.
Another troubling issue - first the U.S. government props up the auto industry - this can be viewed as the "supply" side. Now, it is "encouraging" the "demand" side. This dual aspect should be pondered significantly - but hasn't been.
The purported "environmental" benefit should be questioned and examined. Is the benefit worth the cost? Is it scientifically valid? Might there be better programs, from an environmental standpoint, that could be enacted?
There are other issues, some very troubling, that exist as well.
Another tangential issue is whether the legislative "rush" to expand the program is appropriate. Should the program's popularity among auto dealers, automakers, and qualified car buyers hold inordinate sway given the larger problematic issues mentioned above?
While some may dismiss the questions presented above as relatively inconsequential given the program at this point is "only" potentially $3 billion, this isn't how such legislation should be viewed. Whether it is $3 million, $3 billion, or $3 trillion, the rigor of the policy process should be constant.
In summary, Congress should "junk" the "Cash for Clunkers" program. People will "get their share of the stimulus" in other ways - the only problem is that it won't be something to look forward to...
SPX at 1001.65 as this post is written
For many reasons, I think that the "Cash for Clunkers" program is highly flawed on an "all things considered" basis and should have never been legislated.
Without writing a "book" on the subject, here are a few of my thoughts....
First, as a stimulus program it carries all of the potential risks and unintended consequences of intervention programs, of which I have previously written. These potential risks and unintended consequences should not be overlooked.
Second, the specifics of this "Cash for Clunkers" program carry an array of troubling aspects...
Like most stimulus programs, "Cash for Clunkers" has a thin "veneer" of seeming benefit - until one starts analyzing the program in totality. In this case, the "veneer" is that the program appears to be a "win-win-win" situation - from an environmental perspective, older cars with relatively poor fuel efficiency (and concomitant emissions) are taken off the road; from a consumer perspective, the auto buyer is given "a break" in the form of the reduced purchase price; and from an automaker / GDP perspective car sales increase. So far the government has allotted $1 Billion for the program and is contemplating an additional $2 Billion.
Here are some problems specific to the program, when one views it on an "all things considered" basis:
As some people have mentioned, car sales are being "borrowed" from the future. This is a major issue.
Although automakers are making sales, they are doing so at a discount. Discounting holds many risks from a business perspective; these risks should be known by automakers as it has been a serious industrywide problem in the past, especially for those automakers that have abused the practice.
Another troubling issue - first the U.S. government props up the auto industry - this can be viewed as the "supply" side. Now, it is "encouraging" the "demand" side. This dual aspect should be pondered significantly - but hasn't been.
The purported "environmental" benefit should be questioned and examined. Is the benefit worth the cost? Is it scientifically valid? Might there be better programs, from an environmental standpoint, that could be enacted?
There are other issues, some very troubling, that exist as well.
Another tangential issue is whether the legislative "rush" to expand the program is appropriate. Should the program's popularity among auto dealers, automakers, and qualified car buyers hold inordinate sway given the larger problematic issues mentioned above?
While some may dismiss the questions presented above as relatively inconsequential given the program at this point is "only" potentially $3 billion, this isn't how such legislation should be viewed. Whether it is $3 million, $3 billion, or $3 trillion, the rigor of the policy process should be constant.
In summary, Congress should "junk" the "Cash for Clunkers" program. People will "get their share of the stimulus" in other ways - the only problem is that it won't be something to look forward to...
SPX at 1001.65 as this post is written
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