Monday, August 11, 2014

Remember this boondoggle—Cash for clunkers

Cash for clunkers" (part of Obama's 2009 stimulus) actually cost the auto industry 3 billion in less than a year, according to recent research. I wonder why no one ever calculates the cost to low income families, who if they could buy a, any car which was destroyed by this program, could get to work, the super market, family reunions, recreation, etc.? And how many moderate income family took on new debt to buy that environmentally friendly vehicle due to the carrot of a discount? It's about more than the auto industry losses.

“Cash for Clunkers was a 2009 economic stimulus program aimed at increasing new vehicle spending by subsidizing the replacement of older vehicles. Using a regression discontinuity design, we show the increase in sales during the two month program was completely offset during the following seven to nine months, consistent with previous research. However, we also find the program's fuel efficiency restrictions induced households to purchase more fuel efficient but less expensive vehicles, thereby reducing industry revenues by three billion dollars over the entire nine to eleven month period. This highlights the conflict between the stimulus and environmental objectives of the policy. “

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