View Full Version : CARS Program
I was wondering what people thought about the CARS program.
http://www.cars.gov/
It is a program with niche audience and clearly ill advised. Who is it for?
The only thing I imagine it could do is drive the price up of used junkers cars due to people hoping to buy one cheaply but less than a 2500 and waiting a year hoping to use it as a coupon.
OmCheeto
Jul31-09, 10:14 PM
I was wondering what people thought about the CARS program.
http://www.cars.gov/
It is a program with niche audience and clearly ill advised. Who is it for?
The only thing I imagine it could do is drive the price up of used junkers cars due to people hoping to buy one cheaply but less than a 2500 and waiting a year hoping to use it as a coupon.
Well. I was a bit pissed that I traded in a clunker, trying to stimulate this freakin' economy, for a 2009 California compliant emission vehicle 2 months ago only to find out today that the $1E9 had been spent in 1 week.
And now I hear (yes. hearsay) that another $2E9 has been approved for the program.
Actually, I'm not pissed.
I like my new truck. :!!)
Oops. Not hearsay? (http://www.newser.com/article/d99pl1o80/house-passes-2-billion-to-replenish-cash-for-clunkers-car-purchase-program.html)
Ivan Seeking
Jul31-09, 11:15 PM
It has given the auto industry a huge booster shot. The auto dealers are thrilled. One dealer in NY said that half of all sales this week were driven by the cash for clunkers stimulus.
The money was expected to last twelve weeks and it was gone in four days! Congress had to rush through legislation to extend the program due to its raging success. So there's an additional 1 billion in the economy that we didn't have four days ago [as soon as the auto dealers file for their reimburstments].
Another great success brought to you by the Obama admin.
The long-term benefit is to not only stimulate the economy, but also to help reduce our dependence on foreign oil, which directly affects the GDP by reducing the trade deficit. The ~ 250,000 gas hogs traded in will be destroyed.
Pengwuino
Jul31-09, 11:24 PM
Another great success brought to you by the Obama admin.
Doesn't the word "another" imply there's been more then one? :rofl: o:)
(stay on topic people!! o:) o:) o:) )
The only thing I imagine it could do is drive the price up of used junkers cars due to people hoping to buy one cheaply but less than a 2500 and waiting a year hoping to use it as a coupon.
This is quite a coincidence! I was reading the wikipedia entry not 5 minutes ago and noticed something quite interesting.
http://en.wikipedia.org/wiki/Cash_for_clunkers
To ensure that running trade-in vehicles will not be resold by dealers, the program outlines a procedure for destructively disabling the engine (and thus also precluding the possibility that any mechanical engine components might be salvaged to be used in the repair of any other vehicles): the oil is drained and replaced with a sodium silicate solution, and the engine is then started and run until the dehydrating solution causes engine internals to abrade and ultimately seize. In addition, the salvage or scrap facility which aquires the vehicle cannot sell any powertrain components from the scrap vehicle. This includes the disabled engine (most specifically the long block components), the transmission/transaxle, and in some cases the axle assemblies. The salvage or scrap facilty can sell any other component from the scrap vehicle until they are ready to crush and/or shred the vehicle. The salvage or scrap facility has 180 days to ultimately crush and/or shred the vehicle.
So it looks like there won't be an influx of junkers to purchase.
Ivan Seeking
Jul31-09, 11:32 PM
Doesn't the word "another" imply there's been more then one? :rofl: o:)
Obviously you haven't been watching the news. The credit markets have mostly stabilized; home prices are up for the first time in 34 months; the DJIA is up 40% since the low in march [that would yield an annual gain of about 120%]; the GDP was five times better than last quarter and growth is expected next quarter. And most importantly, the world economy did not collapse. This was all accomplished without nationalizing the banks, in spite of intense pressure on some fronts to do so.
The cars program is just the latest good news.
TheStatutoryApe
Aug1-09, 12:10 AM
From what I was hearing on the radio it sounds like they should kill the program before it costs too much more. The $2B they just added is probably already mostly gone with all of the back applications piled up.
Office_Shredder
Aug1-09, 12:14 AM
From what I was hearing on the radio it sounds like they should kill the program before it costs too much more. The $2B they just added is probably already mostly gone with all of the back applications piled up.
Honestly, a couple billion dollars to push another million car sales isn't a big deal. Far more cost efficient than trying to bail out Ford if it goes under also
TheStatutoryApe
Aug1-09, 12:25 AM
Honestly, a couple billion dollars to push another million car sales isn't a big deal. Far more cost efficient than trying to bail out Ford if it goes under also
I'm not adverse to the idea and what they are accomplishing. I am just wondering how much more money it is going to cost. Apparently dealers have been racking up applications since July 1st. In less than a week the number of applications they had processed already broke the bank and there are still plenty more waiting to be processed right now. If they keep accepting applications I'm wondering how many dealerships are going to be left holding the bag.
Office_Shredder
Aug1-09, 01:14 AM
I'm not adverse to the idea and what they are accomplishing. I am just wondering how much more money it is going to cost. Apparently dealers have been racking up applications since July 1st. In less than a week the number of applications they had processed already broke the bank and there are still plenty more waiting to be processed right now. If they keep accepting applications I'm wondering how many dealerships are going to be left holding the bag.
Wouldn't that be an argument for putting more money into it? To get through that backlog of applications
TheStatutoryApe
Aug1-09, 01:35 AM
Wouldn't that be an argument for putting more money into it? To get through that backlog of applications
Certainly. But they haven't stopped accepting them! Sorry. That's what I meant by 'kill it', stop accepting applications. It just seems like it could spiral out of control and turn into a big money hole if they don't stop accepting the applications. Now that it has been in the news so much there will probably be more people looking to take advantage.
http://en.wikipedia.org/wiki/Cash_for_clunkers
So it looks like there won't be an influx of junkers to purchase.
I meant private-party sale by someone who hasnt traded their car in , any piece of s--- car that barely runs buy it for 800 then keep it for a year and then turn it into the dealer for a 3500-4500 credit effectively using it as a coupon.
Honestly, a couple billion dollars to push another million car sales isn't a big deal. Far more cost efficient than trying to bail out Ford if it goes under also
It has no provisions about buying american cars.
russ_watters
Aug1-09, 11:45 AM
So there's an additional 1 billion in the economy that we didn't have four days ago [as soon as the auto dealers file for their reimburstments].
Another great success brought to you by the Obama admin. And another billion dollars we don't have, to be subtracted from our GDP (plus interest) over the next few years! :rolleyes:
Don't get me wrong, it's not a terrible idea, but just because the money went fast, that doesn't have anything to do with whether the idea was a "great success". This was all accomplished without nationalizing the banks, in spite of intense pressure on some fronts to do so. I'm glad he didn't do that either, but you can't give someone credit for doing something good by not doing something bad. I didn't kill anyone today, so that makes me a great person! :rolleyes:
mgb_phys
Aug1-09, 01:17 PM
The system in Canada is slightly smarter. You can trade in your car for $X in public transit passes or 75% of X toward a bicycle or 50% of X in cash.
Th system in the UK is impressively stupider, last year they announced possible large rebates for clunkers. Which might start this year or next year, they are looking into the details. The result is zero car sales because nobody wants to buy a car now when they might get a few $1000 off in 6months.
Ivan Seeking
Aug1-09, 02:21 PM
And another billion dollars we don't have, to be subtracted from our GDP (plus interest) over the next few years! :rolleyes:
Don't get me wrong, it's not a terrible idea, but just because the money went fast, that doesn't have anything to do with whether the idea was a "great success".
And if no one took advantage of the program? The goal was to stimulate auto sales and put money into the system. It couldn't have been more successful.
As for the increased debt: Hopefully you know by now the working theory that by spending the stimulus money now, we will help to stimulate growth and ultimately reduce the debt to GDP ratio by growing the GDP. There are no guarantess that this will be successful, but I put much more faith in Obama, Geitner, and Bernanke, than I do the Republicans who are complaining - the ones who got us into this mess.
Were the GDP to remain flat, as happened with Japan for over a decade, our long=term debt would be far worse than by providing a stimulus now. The Japan model results from not acting aggressively. That is why we are acting aggressively. The Republican solution is to bury our heads, adhere blindly to a failed ideology, and ignore history.
I'm glad he didn't do that either, but you can't give someone credit for doing mething good by not doing something bad. I didn't kill anyone today, so that makes me a great person! :rolleyes:
Many economists wanted him to nationalize the banks - many said he had no choice if he was to prevent a national and perhaps a global economic meltdown. Obama was convinced that he didn't need to do this, and he was right. It wouldn't be "bad" to nationalize the banks if it was the only way to save the country from an even bigger disaster.
What's more, the right wing wants to portray him as a socialist when in fact he went out of his way to avoid socialist solutions. But, have any Republicans given him credit for this? Of course not. That would mean admitting they are lying...again!
Skyhunter
Aug1-09, 02:36 PM
I meant private-party sale by someone who hasnt traded their car in , any piece of s--- car that barely runs buy it for 800 then keep it for a year and then turn it into the dealer for a 3500-4500 credit effectively using it as a coupon.
Never actually read the rules did you?
The trade-in must have been registered and insured by the owner for 12 months prior to the trade-in.
Never actually read the rules did you?
The trade-in must have been registered and insured by the owner for 12 months prior to the trade-in.
:rolleyes:
Yes I did, but you didnt actually bother to read my post did you?
maybe if I simplify
12 months = 1 year
I meant private-party sale by someone who hasnt traded their car in , any piece of s--- car that barely runs buy it for 800 then keep it for a year and then turn it into the dealer for a 3500-4500 credit effectively using it as a coupon.
Its an great idea in theory in practice a bad execution by the US.
Ivan Seeking
Aug1-09, 05:52 PM
Also noteworthy: 250,000 cars lands in the neighborhood of $5-6 billion in auto sales.
These numbers ars impossible to quantify absolutely, but we can get a ballpark estimate of the effect the cars for clunkers has on oil consumption and the GDP. If we assume that we gained an advantage of 5 miles per gallon, say from 15 to 20 miles per gallon, by replacing gas hogs with more efficient gas hogs, and assuming an average of 15000 miles per year per vehicle, we can expect a reduced demand of about 62.5 million gallons of gasoline per year. We get about 19.5 gallons of gas from every barrel of crude, so if we assume the current price of about $70 per barrel, this respresents reduced imports of about $225 million dollars per year. If we also assume that we get a five-year benefit from this, we find a net benefit from the stimulus of about $125 million above the cost of the stimulus! So in fact by spending a billion, we get more than that back from the energy savings alone - even the superficial net effect on the GDP is less than zero. It is a money maker! The advantage gained through stimulating the economy is more difficult to quantify, but any advantage at all is icing on the cake. Presumably this will provide a significant boost to the auto industry and the economy.
Summary: The cars for clunkers program pays Americans instead of OPEC. OPEC is the only loser in this scheme.
It was reported earlier that Ford Focuses were flying out the showrooms this week.
OmCheeto
Aug1-09, 07:04 PM
I think it's funny that the CARS.gov website lists the 2010 vehicles.
You can trade in your brand new $180,000 12 cylinder 12 mpg Bentley Continental Flying Spur (http://www.fueleconomy.gov/feg/CarsSelectEng.jsp?year=2010&make=Bentley&model=Continental%20Flying%20Spur&hiddenField=Findacar) for $4500, as long as it's in running condition of course.
And I was happy to see that the car I traded in did not qualify for the rebate.
It's hard to imagine that I could have picked up my brand new vehicle for only $5500 when the MSRP was almost $17,000.
But I like the program. I've long felt that the only thing keeping death trap micro cars from taking over the road were death inducing behemoths. It's odd to think that the program might eventually turn my truck from being one of the smallest on the road into one of the largest.
TheStatutoryApe
Aug1-09, 07:11 PM
:rolleyes:
Yes I did, but you didnt actually bother to read my post did you?
maybe if I simplify
12 months = 1 year
Considering that the program was voted in on July 1st, went into effect a week ago, and was originally supposed to end in one month I really doubt this would be a problem.
mgb_phys
Aug1-09, 08:04 PM
Considering that the program was voted in on July 1st, went into effect a week ago, and was originally supposed to end in one month I really doubt this would be a problem.
Unless you want to trade in a Delorean of course!
Considering that the program was voted in on July 1st, went into effect a week ago, and was originally supposed to end in one month I really doubt this would be a problem.
Depends on the life of the Program since they are still honoring trade-ins till unknown
I don't drive an American car but I would like to trade in my old car for a newer, more fuel efficient one. Is this program only for American cars?
No. You may trade in or buy a domestic or a foreign vehicle.
Ivan Seeking
Aug2-09, 10:38 AM
No. You may trade in or buy a domestic or a foreign vehicle.
So what? Toyotas and other foreign cars are actually made in the US. Conversely, many auto parts for domestic auto makers are made in places like Mexico.
This was not a bailout for auto companies. They already got that.
The argument about the GDP means nothing, right? You would rather give the money to OPEC than to Americans?
mgb_phys
Aug2-09, 03:29 PM
I just read the details for this. The new car only has to do 22mpg!
So this program pushes up the minimum price of a used car to $3500 - out of the reach of most poor, trying to get something to get to a job, people so that the middle classes get a discount on their next 22mpg SUV
I thought the new guy was supposed to be a socialist?
I just read the details for this. The new car only has to do 22mpg!
So this program pushes up the minimum price of a used car to $3500 - out of the reach of most poor, trying to get something to get to a job, people so that the middle classes get a discount on their next 22mpg SUV
I thought the new guy was supposed to be a socialist?
Thats what I dont get
a)it doesnt push up the combined fuel MPG to anything in the high 20's.
b)It doesnt help poor people because it adds to the value of used cars
c) it doesnt help the poor because it doesnt apply to used cars that fit the New Car MPG requirements or exceed it. Those in the bottom of income distribution cant afford to buy new cars and for me who can afford to buy a new car I would not want to because the resale value drops the most in the first year I would rather buy a two year old model since it makes more sense economically.
c) I justified away thinking it must be another bailout for auto makers but then I realized it doesnt apply only to american cars and foreign automakers should get bailed out by foreign countries. Even those who support it dont believe its a bailout.
This was not a bailout for auto companies. They already got that.
mgb_phys
Aug2-09, 08:38 PM
c) I justified away thinking it must be another bailout for auto makers but then I realized it doesnt apply only to american cars and foreign automakers should get bailed out by foreign countries. Even those who support it dont believe its a bailout.
It's a bailout for dealers.
There are about 2million car dealers and only 400,000 UAW workers.
Foreign/domestic doesn't really matter these days, as somebody already posted most 'Japanese' cars in America are built in America or Canada while a lot of the parts for 'American" cars are imported.
Foreign/domestic doesn't really matter these days, as somebody already posted most 'Japanese' cars in America are built in America or Canada while a lot of the parts for 'American" cars are imported.
Yes I knew that but I dont understand why bailout the "US" automakers then if since if they go under the market share they occupy will go to foreign automakers which will build those cars in the US which will create replacement jobs unless foreign makers dont create as many jobs as you imply in which case my original statement stands but it cant be "everything for everyone".
KingOfChaos
Aug2-09, 10:01 PM
I was wondering what people thought about the CARS program.
http://www.cars.gov/
It is a program with niche audience and clearly ill advised. Who is it for?
The only thing I imagine it could do is drive the price up of used junkers cars due to people hoping to buy one cheaply but less than a 2500 and waiting a year hoping to use it as a coupon.
LOL..wow guys, don't use that site, seriously. By using that site, you give the government full access and rights to search your computer, since if you agree to their terms of service, you are physically giving them your computer.
Office_Shredder
Aug2-09, 10:05 PM
I just read the details for this. The new car only has to do 22mpg!
So this program pushes up the minimum price of a used car to $3500 - out of the reach of most poor, trying to get something to get to a job, people so that the middle classes get a discount on their next 22mpg SUV
I thought the new guy was supposed to be a socialist?
The old car can only do up to 18 mpg when new. So a lot of older cars are still on the market
.... This was all accomplished without nationalizing the banks, in spite of intense pressure on some fronts to do so....We agree on little else economically, but the bank stabilization turned out successfully without nationalization and the administration gets the credit. There was indeed pressure to nationalize from several corners and the administration held the course. One caveat: the seizure of Fannie Mae and Freddie Mac was effectively a nationalization of financial firms (the largest), and we have yet to see how that will turn out.
LOL..wow guys, don't use that site, seriously. By using that site, you give the government full access and rights to search your computer, since if you agree to their terms of service, you are physically giving them your computer.
Cookies? Oh crap the government might know what I bought at Amazon.
I meant private-party sale by someone who hasnt traded their car in , any piece of s--- car that barely runs buy it for 800 then keep it for a year and then turn it into the dealer for a 3500-4500 credit effectively using it as a coupon.
The program has always had an the end date. Now extended to Nov. 1 2009
Even the extra 2 Billion influx won't last that long.
It wasn't the government announcements of the program that brought on the throngs of customers. Dealerships have been advertising it intensively.
http://www.youtube.com/watch?v=rjrbT_GrFQQ
Some dealerships even started giving the rebates before the program officially began.
http://www.youtube.com/watch?v=lEQ-SPMAPCI&feature=related
I am not sure ow they got away with an early start but it would help explain the immediate surge of paperwork the government had to handle. The dealers couldn't file the forms until the program officially began.
Depends on the life of the Program since they are still honoring trade-ins till unknown
:uhh:
Ivan Seeking
Aug3-09, 01:45 PM
One caveat: the seizure of Fannie Mae and Freddie Mac was effectively a nationalization of financial firms (the largest), and we have yet to see how that will turn out.
Or course, Bush did that. :wink:
Ivan Seeking
Aug3-09, 01:47 PM
I just read the details for this. The new car only has to do 22mpg!
However, it must also be better than the old car. If a contractor trades in a heavy-use truck that gets 15 mpg, and replaces it with one that gets 22 mpg, we are still coming out ahead.
Or course, Bush did that. :wink:Yep. And now Obama has the wheel. He can't afford to have them on the federal budget long term, but no action has been take regards their eventual disposition. Anecdotally, I talk socially to some of the folks that work over there on a regular basis, and I'm amazed at the absolute sense of entitlement in what are otherwise great folks - no matter what the burden on the country, they must survive, to be paid large bonuses, and to continue their 'mission'. Obama is running his individual mortgage bailout plan through Fannie/Freddie, so at the moment they're justified in feeling indispensable. My take is this whole credit crisis has likely worsened the mindset there, not humbled it, as if they were the only survivors of a fiery plane crash and now feel a bit invincible. Lehman Brothers might have ceased to exist, but never them. Wall Street'rs have nothing on them in the hubris department.
I don't think this program was intended to help the poor. It was meant to stimulate those who have money to spend it. And at the same time look like we are helping the environment.
Ivan Seeking
Aug3-09, 04:22 PM
CNN just reported that 62% of the vehicles traded in are trucks. Many of those people bought fuel-efficient cars to replace their truck.
... Many of those people bought fuel-efficient cars to replace their truck.Where'd you get this part?
Interesting points:
...cash for clunkers might cause more driving, since new cars are more fun to drive, and more fuel-efficient cars are less costly to operate. Plus, it takes energy to scrap old vehicles and produce new ones, so the net effect of the program might even increase the use of fossil fuel.
Cash for clunkers is therefore just redistribution to certain consumers and to the auto industry; it is more bailout dressed up as environmental policy. Congress should end the program, not expand it.
Source: http://www.cnn.com/2009/POLITICS/08/03/miron.clunkers/index.html
Office_Shredder
Aug3-09, 04:49 PM
http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2009/08/03/financial/f082355D29.DTL
Officials said the program is succeeding in improving the efficiency of vehicles on the road. One official said the average fuel economy of new vehicles purchased through the program was 25.4 miles per gallon and the average fuel efficiency of the trade-ins was 15.8 mpg, representing a 9.6 mpg fuel economy increase.
Adrock1795
Aug3-09, 07:35 PM
My only problem with this program is that, they destroy the engine and and make the sell of the transmission illegal. Those parts would be useful to repair other vehicles.
X0IcIxhd8ks
Where'd you get this part?
Thats what I was thinking
KingOfChaos
Aug4-09, 01:58 AM
Did anyone actually read what I posted about this site?
Did anyone actually read what I posted about this site?
Yes.
So there's an additional 1 billion in the economy that we didn't have four days ago...Is this a joke? Where is this money coming from, if not being taken out of the economy? Do you believe wealth was actually created by passing a spending bill?
One caveat: the seizure of Fannie Mae and Freddie Mac was effectively a nationalization of financial firms (the largest), and we have yet to see how that will turn out.Fannie and Freddie were government entities to begin with. Their "seizure" was like "seizing" the USPS, not UPS or FedEx.
Thats what I was thinkingI don't doubt that some or 'many' did, but I wanted to get more detail.
Fannie and Freddie were government entities to begin with. Their "seizure" was like "seizing" the USPS, not UPS or FedEx.This is one reason why they're dangerous, people get confused as to what the GSE's are and thus to don't accurately assess the risk the pose. No, they were nothing like the USPS. At the USPS the government signs the pay checks, the government sets the salaries, there are no shareholders and so on. Freddie and Fannie operated on a daily basis completely as private for profit entities complete with publicly traded stock shares. The government's role was to initially sponsor their creation. Not wanting to take responsibility for the huge mortgage flows as part of the yearly federal budget process, the government made them a private organization. There has always been an unwritten understanding, that Fannie/Fred vehemently denied in public, that they were creatures of the government and essentially had the backing of the treasury. (We now know via the seizure that this was always true). This allowed them to borrow money as if they actually were the US treasury, in other words to borrow money at the same interest rate as the treasury - essentially a license to print money.
This is one reason why they're dangerous, people get confused as to what the GSE's are and thus to don't accurately assess the risk the pose. No, they were nothing like the USPS. At the USPS the government signs the pay checks, the government sets the salaries, there are no shareholders and so on. Freddie and Fannie operated on a daily basis completely as private for profit entities complete with publicly traded stock shares. The government's role was to initially sponsor their creation. Not wanting to take responsibility for the huge mortgage flows as part of the yearly federal budget process, the government made them a private organization. There has always been an unwritten understanding, that Fannie/Fred vehemently denied in public, that they were creatures of the government and essentially had the backing of the treasury. (We now know via the seizure that this was always true). This allowed them to borrow money as if they actually were the US treasury, in other words to borrow money at the same interest rate as the treasury - essentially a license to print money.You're exactly right. Sure the Federal gov't "loaned" out the reins of F&F, but their charter was never completely private in the "libertarian" sense, meaning that gov't created them, cut the cord financially, but contingent on F&F continuing its obligation to serve the public interest, with gov't oversight. Government "seizing" them is not in any way like seizing a private company, started and operated by private individuals, that made no voluntary agreement to fulfill any public purpose or goal.
I only made the comparison to the post office because, although they are quite different, the analogy is in the fact that they are both government created entities, created for public purposes, obligated to serve the public interest.
Ivan Seeking
Aug4-09, 07:43 PM
http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2009/08/03/financial/f082355D29.DTL
At that point we are likely doubling our money wrt to imported crude and the GDP.
I don't know what the numbers are wrt to gross sales in dollars, but there is also the issue of taxes and fees collected by the Federal government, and the States, including title transfers and the like, based on probably 5-6 billion in sales.
Ivan Seeking
Aug4-09, 07:51 PM
My only problem with this program is that, they destroy the engine and and make the sell of the transmission illegal. Those parts would be useful to repair other vehicles.
That would be counterproductive. The idea is to get the gas hogs off the road. This program works on a number of levels: It stimulates the economy generally; it stimulates auto sales in particular; it reduces the demand for foreign oil; it reduces CO2 emissions.
Other hidden benefits include a reduction in the cost of health care. There is data relating pollution levels in cities, to health care costs. In particular is the cost of respiratory problems that send people to the ER.
Imo, with rare exception, I think this notion that people will drive more if they buy a respectable car, is silly. That will probably be true in a few cases, but most people have routines and a set of needs that dictate how often they drive, and how far.
TheStatutoryApe
Aug5-09, 04:31 AM
Imo, with rare exception, I think this notion that people will drive more if they buy a respectable car, is silly. That will probably be true in a few cases, but most people have routines and a set of needs that dictate how often they drive, and how far.
I own a crappy old car. I intentionally drive as little as possible because I am afraid of it breaking down on me again. I think alot of people with older cars do this. They probably also drive less to save money on gas. If they are not as worried about their cars breaking down and not as worried about the expense of keeping gas in the car they are most likely going to drive more. How much more is another question all together though.
mgb_phys
Aug5-09, 01:36 PM
If they are not as worried about their cars breaking down and not as worried about the expense of keeping gas in the car they are most likely going to drive more.
Thats one of the problems with the economics of owning a car, once you have sunk the large cost purchase/lease and the annual fixed costs like insurance there isn't much extra marginal cost to driving it (at least with US fuel prices).
So if you never use a car (and don't own one) it could be cheaper to take transit but once you buy a car then it becomes cheaper to use it for all trips.
I just got sent the details for the Canadian equivalent, naturally since the Canadian government is involved it's much more complicated - but does have some good ides. Here are the options for taking your payback http://www.scrapit.ca/incentivechoices.htm
jimmysnyder
Aug5-09, 01:56 PM
Google "broken window fallacy". Are they going to give incentives for people to destroy their houses next?
mgb_phys
Aug5-09, 02:33 PM
Google "broken window fallacy". Are they going to give incentives for people to destroy their houses next?
Depends what the aim is, to improve air quality in cities removing clunkers works quite well - the majority of pollution is produced by a smaller number of older vehicles. A scrap refund is about the only way to incenitivize (is that a word?) these vehicles off the road - or you could introduce expensive frequent emmissions checks for cars more than n years old.
If you want to reduce overall fuel usage then you can put up gas prices, change emissions regs and tax/vehicle classifications to make smaller cars cheaper or always a favourite - build more roads.
Imo, with rare exception, I think this notion that people will drive more if they buy a respectable car, is silly. That will probably be true in a few cases, but most people have routines and a set of needs that dictate how often they drive, and how far.It's not the respectability, its the lower cost per mile driven of the newer fuel efficient vehicle that increases total miles driven. That doesn't nullify the effect of the program, but it is far from silly, rather it is well documented (http://en.wikipedia.org/wiki/Jevons_paradox) in economics.
Another economic near certainty about the clunkers program: it will substantially increase the cost of low end used vehicles - the kind of car that gets the less fortunate around.
Ivan Seeking
Aug5-09, 03:01 PM
It's not the respectability, its the lower cost per mile driven of the newer fuel efficient vehicle that increases total miles driven.
When I said respectable, I meant that wrt to social consciousness and being part of the solution to the energy problem, the trade deficit, and our reliance on foreign oil, instead of being part of the problem.
That doesn't nullify the effect of the program, but it is far from silly, rather it is well documented (http://en.wikipedia.org/wiki/Jevons_paradox) in economics.
That is not evidence that it applies in the case of cars. I say it is silly based on a practical perspective. People don't normally drive just to be driving. The drive when they have a need to do so.
Another economic near certainty about the clunkers program: it will substantially increase the cost of low end used vehicles - the kind of car that gets the less fortunate around.
Only temporarily. In the long term, all of the more fuel efficient cars will help to drive down the used car price for fuel efficient cars, which are typically more expensive than gas hogs, which means that fuel efficient cars will be more available to the disadvantaged. This in turn means that they will pay less of their incomes out to OPEC.
Also, most disadvantaged people don't buy SUVs anyway. They can't afford the gas.
Only temporarily. In the long term, all of the more fuel efficient cars will help to drive down the used car price for fuel efficient cars, which are typically more expensive than gas hogs, which means that fuel efficient cars will be more available to the disadvantaged. This in turn means that they will pay less of their incomes out to OPEC.
Also, most disadvantaged people don't buy SUVs anyway. They can't afford the gas.
They buy whatever they can get for cheap just to get around wether it be an 80's miata or that ugly SUV rodeo car. Some people have to buy gas guzzlers for their job ie a truck. The gas isnt much of an issue unless thinking in the long run which most people do not when the only thought is how they are going to get to work quickly.
That is not evidence that it applies in the case of cars. I say it is silly based on a practical perspective. People don't normally drive just to be driving. The drive when they have a need to do so.
This is not true. Think about the amount of cars in Los Angeles.
Ivan Seeking
Aug5-09, 05:17 PM
They buy whatever they can get for cheap just to get around wether it be an 80's miata or that ugly SUV rodeo car. Some people have to buy gas guzzlers for their job ie a truck. The gas isnt much of an issue unless thinking in the long run which most people do not when the only thought is how they are going to get to work quickly.
In that event, we need to consider not a five-year advantage for the GDP, as I did. Instead we need to consider something more like a fifteen-year advantage, which would mean that we get more something more like a 4:1 or 6:1 return on our billion dollar investment, in terms of the GDP.
Thanks, you make a good point: We have to consider not only the immediate benefit of getting a clunker off the road, we also have to consider that the incentive to buy fuel-efficient cars will put some of those cars on the road for many years in place of others that would have been gas hogs. That is to say that some people will buy more efficient vehicles that otherwise wouldn't have done so.
This is not true. Think about the amount of cars in Los Angeles.
What does that have to do with anything? Usage is dependent on need. That doesn't change no matter what vehicle one owns.
Ivan Seeking
Aug5-09, 05:30 PM
Google "broken window fallacy". Are they going to give incentives for people to destroy their houses next?
The broken window fallacy does not apply in this context. The reason is that we are effectively creating wealth [not depleting wealth] by reducing the trade deficit.
If the shopkeeper buys a high efficiency window to replace the old leaky one, and as a result, over the coming years, the shopkeeper reduces his heating bill by more than the value of the window, and assuming that his heat energy supplier is a traveler from a distant land, everyone wins but the traveler - OPEC.
The real number to consider is the GDP. That is the bottom line.
DavidSnider
Aug5-09, 05:48 PM
This all seems very hand-wavey to me. Does anybody have a link with some sort of ballpark estimates?
The main complaints I seem to be hearing are:
1) Depreciation of the new car
2) The cost to dispose of the old car
3) Cost to manufacture the new one
4) The cost of borrowing the money for the incentive
5) The cost of borrowing the money to manufacture the car
When I said respectable, I meant that wrt to social consciousness and being part of the solution to the energy problem, the trade deficit, and our reliance on foreign oil, instead of being part of the problem. Yes, understood.
That is not evidence that it applies in the case of cars.The theory, well documented over all kinds of data, applies to the replacement of _any_ energy using device with a more efficient one. There are complications and other counter acting economic effects.
I say it is silly based on a practical perspective. People don't normally drive just to be driving. The drive when they have a need to do so.People drive, fly, take the train, eat a hamburger all when they need/want to and always with an eye on the cost of each. The effects of cost are not always immediate because of elasticity (slack in the market), but eventually always come into play. In the case of the car, a practical example would be that third yearly trip to grandma's house that was previously forgone because of the gas cost in the clunker, but now in the new 25 mpg ride is affordable again.
Though I still oppose it, all and all this is one of the more effective stimulus ideas, because it is timely and targeted, dramatically unlike the rest of the stimulus. But it is not without costs, and I don't mean just to the the US Treasury. It benefits the few, at a cost to others, particularly those with very low incomes as they can't play.
Only temporarily. In the long term, all of the more fuel efficient cars will help to drive down the used car price for fuel efficient cars, which are typically more expensive than gas hogs, which means that fuel efficient cars will be more available to the disadvantaged. This in turn means that they will pay less of their incomes out to OPEC.Getting off (imported) oil is a great goal though I don't care for these means. In the long term the gas hogs clunkers disappear by themselves. And if the argument is the application of market forces to the car companies will help the disadvantaged by increasing the supply of fuel eff. cars (and lowering the cost), I can think of a counter argument along those lines. The disadvantaged need very, very low cost cars. Detroit traditionally avoids this market, they chase the higher cost and higher margin cars (esp. SUVs) so they and the unions can maintain the vertically integrated business models. That shamefully has left to India and China the role of making the $2500 car (e.g the Tata Nano). This buy back plan is yet another enabler along the old lines - the subsidy encourages Detroit to not serve the low cost market. Why do so when the govt is paying people to buy your more expensive cars?
Also, most disadvantaged people don't buy SUVs anyway. They can't afford the gas.Eh? SUVs? They scrape to buy (as I did once upon a time) a $1500 car. Now all those cars cost ~$4000, or whatever the buy back price point.
jimmysnyder
Aug5-09, 07:00 PM
Depends what the aim is, to improve air quality in cities removing clunkers works quite well
I can think of much better ways to do that.
you could introduce expensive frequent emmissions checks for cars more than n years old.
If you want to reduce overall fuel usage then you can put up gas prices, change emissions regs and tax/vehicle classifications to make smaller cars cheaper or always a favourite - build more roads.
And so, apparently, can you. Surely no one thinks this is a way to reduce pollution, you can't get a credit for dropping the clunker unless you buy a new slightly less clunker.
mgb_phys
Aug5-09, 07:05 PM
I can think of much better ways to do that.
Yes, if we didn't have such faith in politicians we might be suspicious of the motives of handing out $4000 to people who could afford to buy new cars.
Surely no one thinks this is a way to reduce pollution, you can't get a credit for dropping the clunker unless you buy a new slightly less clunker.
Thats why the Canadian system might be better, you get more money for a trade in against transit passes, less against a bike or ride-share scheme and least in cash. There is no requirement to get a replacement car.
jimmysnyder
Aug5-09, 07:27 PM
The broken window fallacy does not apply in this context.
This context is a textbook example of the broken window fallacy. You turn in a working car which is demolished and you have to buy a newly manufactured car to replace it.
The reason is that we are effectively creating wealth [not depleting wealth] by reducing the trade deficit.
Reducing the trade deficit does not create wealth, it just shifts it around. There is only one way to reduce the trade deficit: Produce more and/or consume less. Politicians don't like this answer, they prefer to blame foreigners. So what, it's still true. This program will not save a drop of gasoline. The energy cost of building a new car to replace a servicable old car will eat all of the savings and more.
...There is only one way to reduce the trade deficit: Produce more and/or consume less. Politicians don't like this answer, they prefer to blame foreigners. So what, it's still true. That is so fundamentally true it should be inscribed on one those shiny white buildings the Pols enter daily.
This program will not save a drop of gasoline. The energy cost of building a new car to replace a serviceable old car will eat all of the savings and more.Er probably true in terms of a not saving a drop of energy (coal et al) after counting the new car production. Likely it will save on some gasoline, though not much as much as hoped.
Reducing the trade deficit does not create wealth, it just shifts it around. There is only one way to reduce the trade deficit: Produce more and/or consume less. Politicians don't like this answer, they prefer to blame foreigners. So what, it's still true. This program will not save a drop of gasoline. The energy cost of building a new car to replace a servicable old car will eat all of the savings and more.
I've been waiting for someone to point this out.
Google "broken window fallacy". Are they going to give incentives for people to destroy their houses next?
If the shopkeeper buys a high efficiency window to replace the old leaky one, and as a result, over the coming years, the shopkeeper reduces his heating bill by more than the value of the window, and assuming that his heat energy supplier is a traveler from a distant land, everyone wins but the traveler - OPEC.
So if put sugar in someone's gas tank, ruining their car, and they go buy a new one, I can claim that putting sugar in gas tanks of older cars helps the economy.
Is that more analogous to the broken glass theory of economics, or the CARS program?
Besides tax payers, of course, who footing the bill for this? Any takers?
So if put sugar in someone's gas tank, ruining their car, and they go buy a new one, I can claim that putting sugar in gas tanks of older cars helps the economy.
Is that more analogous to the broken glass theory of economics, or the CARS program?
Lol
Er probably true in terms of a not saving a drop of energy (coal et al) after counting the new car production. Likely it will save on some gasoline, though not much as much as hoped.
Why the need to buy new arent there equivalently efficient 2007 and 2006 that are on the selling market or did some great technological MPG advance happen in 2008 that I am not aware of.
http://www.msnbc.msn.com/id/32290028/ns/us_news-environment/page/2/
http://blogs.cars.com/kickingtires/2009/08/cash-for-clunkers-selling-efficient-cars.html
"No. 2: Subaru saw sales of its all all-wheel-drive lineup skyrocket 34% in July thanks to Cash for Clunkers and the launch of the new Legacy sedan and Outback wagon, which haven’t even hit every state yet. While Subaru has been one of the only automakers to keep its head above water during the past year’s dismal sales slump, its lineup isn’t especially efficient, mainly because all its cars are equipped with all-wheel drive. The Impreza and Legacy with manual transmission get the program’s passenger-car bare minimum of 22 mpg combined, meaning anyone trading in a clunker for a Subaru car is likely to get only $3,500.The new Legacy and Outback have an optional CVT transmission which raises combined mileage to 26 and 24 mpg respectively."
TheStatutoryApe
Aug6-09, 01:41 AM
Some criticisms I have heard about on the radio.
WASHINGTON – "Cash for clunkers" could have the same effect on global warming pollution as shutting down the entire country — every automobile, every factory, every power plant — for an hour per year. That could rise to three hours if the program is extended by Congress and remains as popular as it is now.
Climate experts aren't impressed.
Compared to overall carbon dioxide emissions in the United States, the pollution savings from cash for clunkers do not noticeably move the fuel gauge. Environmental experts say the program — conceived primarily to stimulate the economy and jump-start the auto industry — is not an effective way to attack climate change.
"As a carbon dioxide policy, this is a terribly wasteful thing to do," said Henry Jacoby, a professor of management and co-director of the Joint Program on the Science and Policy of Global Change at MIT. "The amount of carbon you are saving per federal expenditure is very, very small."
cont... (http://news.yahoo.com/s/ap/20090805/ap_on_sc/us_cash_for_clunkers_pollution)
The guidelines in the House-passed bill state that large SUVs and trucks, typically considered gas guzzlers in everyday conversation, qualify for the $3,500 credit, and in some cases the $4,500 credit, depending on the trade-ins that come through the door for them. New Category 2 trucks -- like the Hummer H-3, Ford Explorer, Chevy Silverado, and Toyota Tundra -- qualify if they get at least 15 MPG combined, and get at least one mile per gallon more than the car or truck being traded in.
The larger Category 3 trucks have no fuel-efficiency rules at all, since the EPA does not rate them for MPG. The only requirement for their purchase is that a buyer be trading in a pre-2002 Category 3 truck that is as large or larger than the one they're buying. For example, you can bring in your 2001 Chevy Suburban and buy a new Chevy Suburban, and still get the $3,500 credit. The bill has no requirement that the trucks, classified by the Federal Highway Administration as "work trucks," be used for farm or construction work.
cont... (http://www.politicsdaily.com/2009/08/04/cash-for-hummers-taxpayers-foot-the-bill-for-guzzler-upgrades/)
The first link is the same as my msnbc one.
Some criticisms I have heard about on the radio.
The guidelines in the House-passed bill state that large SUVs and trucks, typically considered gas guzzlers in everyday conversation, qualify for the $3,500 credit, and in some cases the $4,500 credit, depending on the trade-ins that come through the door for them. New Category 2 trucks -- like the Hummer H-3, Ford Explorer, Chevy Silverado, and Toyota Tundra -- qualify if they get at least 15 MPG combined, and get at least one mile per gallon more than the car or truck being traded in.
The larger Category 3 trucks have no fuel-efficiency rules at all, since the EPA does not rate them for MPG. The only requirement for their purchase is that a buyer be trading in a pre-2002 Category 3 truck that is as large or larger than the one they're buying. For example, you can bring in your 2001 Chevy Suburban and buy a new Chevy Suburban, and still get the $3,500 credit. The bill has no requirement that the trucks, classified by the Federal Highway Administration as "work trucks," be used for farm or construction work.
cont...
I didnt know this. Oh come on.
TheStatutoryApe
Aug6-09, 03:14 AM
I didnt know this. Oh come on.
According to a CNN article (http://money.cnn.com/2009/07/29/autos/clunker_tips/?postversion=2009073013) they only assigned 7.5 million towards category three vehicles (no mention on category 2 though). It still seems to punch a hole in the pollution control and oil independence selling points of the bill.
According to a CNN article (http://money.cnn.com/2009/07/29/autos/clunker_tips/?postversion=2009073013) they only assigned 7.5 million towards category three vehicles (no mention on category 2 though). It still seems to punch a hole in the pollution control and oil independence selling points of the bill.
Even the Category 2 vehicles. Come on.
but for the Category 3 even a few hundred of taxpayer money for that use is ??????come on.
...Why the need to buy new arent there equivalently efficient 2007 and 2006 that are on the selling market or did some great technological MPG advance happen in 2008 that I am not aware of.Good point, though the rules of this program say buy new....
jimmysnyder
Aug6-09, 02:40 PM
On the bright side, the dumpster business is booming. Those huge dumpsters that you normally see at construction sites have been sitting idle now that there aren't any construction sites. They have been repurposed as advertising gimmicks at every car dealer in this vicinity. They have a dumpster and an old car sticking out of it to entice people who were going to trade in their cars anyway to trade in their cars. I thought it was funny the first time I saw it and mildly annoying the second time. Now that I have seen a dozen examples of this joke I am so angry that I have decided to keep my Crosley CC just for spite.
mgb_phys
Aug6-09, 03:07 PM
And finally some good news for the RV business - pilots have somewhere to live convenient for the airport.
http://www.rvbusiness.com/tag/los-angeles-international-airport/
russ_watters
Aug6-09, 03:09 PM
The auto company bailouts were unpopulare because they are anti-capitalist. This is just a clever way around that - it is an extra bailout for the auto makers, but this time, car owners pay 3/4 of the cost directly!
The auto company bailouts were unpopulare because they are anti-capitalist. This is just a clever way around that - it is an extra bailout for the auto makers, but this time, car owners pay 3/4 of the cost directly!Well, if you include all car owners, we're paying for 100% plus. The (reduced) cost of the new car, the cost of the bailout, plus the loss of the additional wealth that would have been created with the money if not taken from taxpayers.
On the other hand this type of program is the pro-middle class politics that is always being promised by the Republicans were as historically Dems were all about focusing on the lower income folks and Republicans on the higher income folks leaving the middle class stranded.
... as historically Dems were all about focusing on the lower income folks and Republicans on the higher income folks...Yeah, according to the historically delusional logic and fraudulent claims of Dems.
Yeah, according to the historically delusional logic and fraudulent claims of Dems.
Regardless of what you may think of the welfare program it is a program aimed solely at the poor that was passed under Democratic leadership as well as the Section 8 program.
Yeah, according to the historically delusional logic and fraudulent claims of Dems.Regardless of what you may think of the welfare program it is a program aimed solely at the poor that was passed under Democratic leadership as well as the Section 8 program.The delusional logic and fraud refer to the claim that opposition to such programs is due to being on the side of the "higher income folks", against the poor.
mgb_phys
Aug7-09, 10:39 AM
According to the website Autobytel.com - who have a search page for 'does my car qualify for a trade in' the most searched for vehicles are:
Ford F-Series
Ford Explorer
Chevrolet C/K/Silverado
Jeep Grand Cherokee
Dodge Ram
Chevrolet Blazer
Jeep Cherokee
Dodge Grand Caravan
Dodge Dakota
Ford Ranger
Of course - this doesn't mean people aren't replacing them with the equivalent new SUV/pickup, but it does suggest that people are getting rid of large vehicles rather than just trading in real 20 year old clunkers.
http://content.usatoday.com/communities/driveon/post/2009/07/68495642/1
OmCheeto
Aug7-09, 11:56 AM
ref 1 (http://whitehouse.blogs.foxnews.com/2009/08/06/president-obamas-statement-on-senate-passage-of-cash-for-clunkers-extension/)
August 6, 2009
....the initial transactions are generating a more than 50% increase in fuel economy; they are generating $700 to $1000 in annual savings for consumers in reduced gas costs alone; and they are getting the oldest, dirtiest and most air polluting trucks and SUVs off the road for good.
ref 2 (http://www.msnbc.msn.com/id/32313464/ns/business-autos/)
Through late Tuesday, the most recent data available, more than $775 million of the original $1 billion had been spent, accounting for the sale of nearly 185,000 new vehicles. Administration officials estimate the new money will last into Labor Day and could prompt another 500,000 vehicle sales.
By my calculations, that's $1.5 billion dollars in fuel savings per year.
Perhaps they should have named it "The War on Gas Hogs".
For some reason, spending money on wars seems more palatable to some people.
Ivan Seeking
Aug7-09, 01:21 PM
Some auto dealers are running out of inventory.
Another 2 billion was approved.
I do believe that this is about the most popular and successful government program that I have ever seen initiated. And God forbid that we invest a few billion in the US [money that we get back by not paying OPEC anyway] - a few tenths of a percent of what we have spent in Iraq.
Why do so many people on the right think the Iraqi people are more important than Americans? Apparently this is the case. The only spending favored is spending for wars [and one we didn't even need to fight].
What is the value of ending our reliance on foreign oil? How much do we spend on the military to protect our oil interests? The benefits from this cars program is manyfold.
This is not just a bailout because it pays back in reduced oil imports and it helps to improve the US position globally. The less we need foreign oil, the greater our latitude of options.
mgb_phys
Aug7-09, 02:32 PM
And at least this time congress are showing the way, they are trading in their old clunker executive jets for shiny new ones.
No word on mpg or how much rebate they get but it might be of interest to mentors wishing to trade in their PF issue Learjets.
http://online.wsj.com/article/SB124960404730212955.html
Ivan Seeking
Aug7-09, 03:24 PM
And at least this time congress are showing the way, they are trading in their old clunker executive jets for shiny new ones.
No word on mpg or how much rebate they get but it might be of interest to mentors wishing to trade in their PF issue Learjets.
http://online.wsj.com/article/SB124960404730212955.html
That has nothing to do with the topic.
mgb_phys
Aug7-09, 03:31 PM
Neither has the "historically delusional logic and fraudulent claims of "
It was a light hearted aside.
Why do so many people on the right think the Iraqi people are more important than Americans? Apparently this is the case. The only spending favored is spending for wars [and one we didn't even need to fight].
Save that thought. The next time someone proposes a tax cut to let Americans keep more of their own money come back here and dig it up.
Why do so many people on the right think the Iraqi people are more important than Americans? Apparently this is the case.Ivan, the forum rules can be found here: http://www.physicsforums.com/showthread.php?t=113181
Is there a single one of them that you don't violate blatantly and regularly?
What is the value of ending our reliance on foreign oil? How much do we spend on the military to protect our oil interests? The benefits from this cars program is manyfold.
This is not just a bailout because it pays back in reduced oil imports and it helps to improve the US position globally. The less we need foreign oil, the greater our latitude of options.
I doubt anybody has a problem with reducing our dependence on foreign oil or are rate of emissions. I think people have a problem with taking a page from P. Diddy and deciding we could solve our problems without thinking just by throwing a lot of money at it. Scientist seem to agree that this is not the best dollar for dollar way to reduce emissions. It seems this is just a bailout wrapped around an emission saving premise that gives a select group of taxpayers (really another tax break)money back, I rarely condone a tax cut but if you just want to put money back in peoples hand just give them another tax break and if youare worried about emissions then dont give them a tax break and use that money in a better dollar for dollar way of reducing emissions.
But some energy experts say the country is overpaying for the pollution reductions, mostly because cash for clunkers is more about stimulating the economy than cutting pollution.
Paying up to $4,500 per clunker means the government is spending more than $160 for every ton of carbon dioxide removed over 10 years, said MIT's Jacoby, co-author of the book "Transportation in a Climate-Constrained World."
That's five to 10 times more than the estimated per-ton cost of carbon dioxide for power plants in the cap-and-trade system passed earlier this year by the House.
http://www.msnbc.msn.com/id/32290028/ns/us_news-environment/page/2/
mheslep
Aug10-09, 12:43 PM
According to the website Autobytel.com - who have a search page for 'does my car qualify for a trade in' the most searched for vehicles are:
Ford F-Series
Ford Explorer
Chevrolet C/K/Silverado
Jeep Grand Cherokee
Dodge Ram
Chevrolet Blazer
Jeep Cherokee
Dodge Grand Caravan
Dodge Dakota
Ford Ranger
Of course - this doesn't mean people aren't replacing them with the equivalent new SUV/pickup, but it does suggest that people are getting rid of large vehicles rather than just trading in real 20 year old clunkers.
http://content.usatoday.com/communities/driveon/post/2009/07/68495642/1
Here's actual vehicles-sold count from Edmunds (via CNN):
1 Ford Escape (4WD SUV hybrid)
2 Ford Focus (sedan)
3 Jeep Patriot (4WD SUV)
4 Dodge Caliber (4WD)
5 Ford F-150 (4WD Truck)
6 Honda Civic (sedan)
7 Chevrolet Silverado (4WD Truck)
8 Chevrolet Cobalt
9 Toyota Corolla (sedan)
10 Ford Fusion (4WD hybrid)
http://money.cnn.com/2009/08/07/autos/cash_for_clunkers_sales/index.htm
Note this list differs substantially from the one offered by the government, presumably because the government list counted the sub-models as different vehicles (i.e. Focus S, Focus SE, Focus SEL, etc)
bleedblue1234
Aug10-09, 12:47 PM
The CARS program is absolutely idiotic:
1) We are taking perfectly drivable cars, that work perfectly fine, and DESTROYING them and turning them into scrap for the benefit of new car dealers...
2) We are mostly purchasing foreign cars with these incentives.
3) We are piling more debt onto a consumer already crushed by debt.... and taking cars that are already payed off, destroying them, taking money from ourselves and giving people money to buy new cars....
4) We are hurting the used car market SIGNIFICANTLY as cars are being DESTROYED rather than sold.. and auction prices for used cars are going up to reflect this...
5) With the amount of debt and issues the economy has now, we need to drive our cars until the engines fall out...
End of Story...
mheslep
Aug10-09, 12:54 PM
...
2) We are mostly purchasing foreign cars with these incentives.
Do you have any reference for that claim? I believe the reverse is true given the Edmunds list.
jimmysnyder
Aug10-09, 01:45 PM
Do you have any reference for that claim? I believe the reverse is true given the Edmunds list.
Foreign makes, not foreign cars.
CARS vouchers in Week 1 helped consumers buy 184,304 new vehicles, more than half of which were foreign makes, mainly Toyota, Honda, Nissan, and Hyundai, according to the US Department of Transportation.
Of those foreign cars and trucks, more than half are made in the US. Best sellers include the Toyota Corolla, the Ford Focus, the Honda Civic, and Toyota’s Prius and Camry.
Christian Science Monitor (http://features.csmonitor.com/politics/2009/08/07/cash-for-clunkers-is-popular-but-is-it-truly-a-us-stimulus/)
mheslep
Aug10-09, 02:17 PM
Foreign makes, not foreign cars.
Christian Science Monitor (http://features.csmonitor.com/politics/2009/08/07/cash-for-clunkers-is-popular-but-is-it-truly-a-us-stimulus/)As I indicated above, the DOT count (used in your CSM reference) is misleading. Toyota is not in the top five of the clunker replacements. Most of the replacement cars are domestic makes per Edmunds.
jimmysnyder
Aug10-09, 02:33 PM
Do you have any reference for that claim? I believe the reverse is true given the Edmunds list.
As I indicated above, the DOT count (used in your CSM reference) is misleading. Toyota is not in the top five of the clunker replacements. Most of the replacement cars are domestic makes per Edmunds.
You asked for a reference and you got a reference. What is the Edmunds list? Are you refering to the autobytel list? Why do you think the DOT count is misleading? Are their figures incorrect?
The question is not "Which particular model is the most popular", it is "Are more US makes sold, or more foreign makes.". It turns out that foreign makes comprise 55% of the market in general and it should come as no surprise that they would comprise 55% of the C4C program.
Wall Street Journal (http://online.wsj.com/mdc/public/page/2_3022-autosales.html)
Actually, the question is "are more us cars sold, or foreign cars". The answer is US cars since the foreign makes are built here.
mheslep
Aug10-09, 02:55 PM
You asked for a reference and you got a reference. Yes, though we don't know what bleedblue based his claim upon.
What is the Edmunds list?
As posted above. Edmunds tallied up the sales of clunker replacements, reported here by CNN Money
Trucks win in Cash for Clunkers game (http://money.cnn.com/2009/08/07/autos/cash_for_clunkers_sales/index.htm)
The top 10 rankings they show come from Edmunds. Three days prior CNN Money posted the DOT list:
Cash for Clunkers cars: Small wins big (http://money.cnn.com/2009/08/04/autos/cash_for_clunkers_cars/index.htm?postversion=2009080515)
Are you refering to the autobytel list?
No
Why do you think the DOT count is misleading? Are their figures incorrect?As posted above, they (DoT) apparently subdivided their count by model variation, so that, e.g., the two full size trucks listed by Edmonds don't even appear on the DOT list. The Money CNN article explains further.
The question is not "Which particular model is the most popular",
Agreed.
it is "Are more US makes sold, or more foreign makes.".
Agreed
It turns out that foreign makes comprise 55% of the market in general True
and it should come as no surprise that they would comprise 55% of the C4C program.
It turns out they do not, not even close per Edmunds. C4C has mostly been domestic, and largely SUVs and trucks.
jimmysnyder
Aug10-09, 03:04 PM
It turns out they (foreign makes) do not (comprise 55% of the C4C market), not even close per Edmunds. C4C has mostly been domestic, and largely SUVs and trucks.
While critics had feared that car shoppers would use the program mostly to buy trucks, in fact 83% of the vehicles traded in have been trucks and SUVs while 60% of vehicles purchased were passenger cars, according to Secretary of Transportation Ray LaHood.
This is from the link you posted. I think you read it wrong. I didn't see anything in either of the links you posted that would help answer the question at hand, foreign vs domestic.
mgb_phys
Aug10-09, 03:13 PM
Unless I missunderstood the story, the autobytel data was people searching if their TRADE-IN car qualified. So the data seems to suggest that the majority of people are looking to get rid of their SUV/pickup.
Of course it doesn't mean they didn't go out and buy a new version of the same SUV/Pickup that gets 1mpg more.
It may also be that people trading in a 20 year old Buick didn't go online to look it up because 20year old clunker driver != web user, or because it was obvious that it qualified and people were only researching edge cases.
mheslep
Aug10-09, 03:41 PM
This is from the link you posted. I think you read it wrong. No, that quote is from the August 5th article which is based upon the DoT list. Three days later in the August 8th article they challenge all the conclusions of the DoT list, based on the Edmunds list.
I didn't see anything in either of the links you posted that would help answer the question at hand, foreign vs domestic.We certainly have help, just not proof. We don't know what the sales distribution looks like for, say, #11 through #50. But given there are only two foreign makes in the top 10, the odds favor a majority domestic source for C4C.
jimmysnyder
Aug10-09, 03:52 PM
No, that quote is from the August 5th article which is based upon the DoT list. Three days later in the August 8th article they challenge all the conclusions of the DoT list, based on the Edmunds list.
We certainly have help, just not proof. We don't know what the sales distribution looks like for, say, #11 through #50. But given there are only two foreign makes in the top 10, the odds favor a majority domestic source for C4C.
I have posted a reference for the case that more cars of foreign make were sold under the Cash for Clunkers program than domestic. You have posted no such link to support your case. Please don't drag this out. Wait until you have such a link and then post it. Thanks.
bleedblue1234
Aug11-09, 12:43 PM
Let me just report in case this got buried..
The CARS program is absolutely idiotic:
1) We are taking perfectly drivable cars, that work perfectly fine, and DESTROYING them and turning them into scrap for the benefit of new car dealers...
2) We are mostly purchasing foreign cars with these incentives.
3) We are piling more debt onto a consumer already crushed by debt.... and taking cars that are already payed off, destroying them, taking money from ourselves and giving people money to buy new cars....
4) We are hurting the used car market SIGNIFICANTLY as cars are being DESTROYED rather than sold.. and auction prices for used cars are going up to reflect this...
5) With the amount of debt and issues the economy has now, we need to drive our cars until the engines fall out...
End of Story...
mgb_phys
Aug11-09, 01:03 PM
1) We are taking perfectly drivable cars, that work perfectly fine, and DESTROYING them and turning them into scrap for the benefit of new car dealers...
Car dealers are people too. And all that money eventually flows back into the economy, polyester suits and cheap cologne don't grow on trees.
2) We are mostly purchasing foreign cars with these incentives.
Most of them are built in the USA - Germany and Japan need somewhere with a cheap disposable work force. And anyway the German and Japanese car makers are public companies so Wall St investors can buy shares in them. Would you rather your pension was invested in VW or GM? By not buying a Porsche you risk the life savings of little old ladies.
3) We are piling more debt onto a consumer already crushed by debt.... and taking cars that are already payed off, destroying them, taking money from ourselves and giving people money to buy new cars....
Thats Capitalism baby
4) We are hurting the used car market SIGNIFICANTLY as cars are being DESTROYED rather than sold.. and auction prices for used cars are going up to reflect this...
See, a success (and you wondered why economics was called the dismal science)
5) With the amount of debt and issues the economy has now, we need to drive our cars until the engines fall out...
Like Volvo - do you really want America to be more like Sweden ?
1) We are taking perfectly drivable cars, that work perfectly fine, and DESTROYING them and turning them into scrap for the benefit of new car dealers...Car dealers are people too. And all that money eventually flows back into the economy, polyester suits and cheap cologne don't grow on trees.The broken glass theory of economics, again?
See, a success (and you wondered why economics was called the dismal science)
A success by pricing some people out of the used car market?
OmCheeto
Aug12-09, 11:11 AM
Let me just report in case this got buried..
The CARS program is absolutely idiotic:
1) We are taking perfectly drivable cars, that work perfectly fine, and DESTROYING them and turning them into scrap for the benefit of new car dealers...
Perfectly drivable cars that get crappy gas mileage and aren't worth that much.
I think the buyers are benefiting also.
4) We are hurting the used car market SIGNIFICANTLY as cars are being DESTROYED rather than sold.. and auction prices for used cars are going up to reflect this...
Let's see. What's going to be left? Used cars that get good gas mileage, and used cars that get crappy gas mileage worth more than $4500.
5) With the amount of debt and issues the economy has now, we need to drive our cars until the engines fall out...
If not for a similar program, I'd have driven my ebola infected car forever. It leaked from every orifice imaginable. It took me a week before I got out of the habit of looking in the rear view mirror every time I stepped on the gas to see how much smoke I was generating.
End of Story...
Not so fast... My new truck is actually getting better mileage in the city than the epa says it should get on the highway, which is 40% better than the car I traded in.
Although it was Ford that gave me the $5000 rebate and $50 for old Ebola, the effect was the same as this program.
I actually thanked the dealership for not making me pay them to take my old car as a trade-in.
bleedblue1234
Aug12-09, 01:21 PM
Perfectly drivable cars that get crappy gas mileage and aren't worth that much.
I think the buyers are benefiting also.
Let's see. What's going to be left? Used cars that get good gas mileage, and used cars that get crappy gas mileage worth more than $4500.
If not for a similar program, I'd have driven my ebola infected car forever. It leaked from every orifice imaginable. It took me a week before I got out of the habit of looking in the rear view mirror every time I stepped on the gas to see how much smoke I was generating.
Not so fast... My new truck is actually getting better mileage in the city than the epa says it should get on the highway, which is 40% better than the car I traded in.
Although it was Ford that gave me the $5000 rebate and $50 for old Ebola, the effect was the same as this program.
I actually thanked the dealership for not making me pay them to take my old car as a trade-in.
A) Maybe it is a good incentive for you.. but at best it pushes a little bit of car sales at the cost of a debt riddled consumer (on the average) and more federal dollars at a huge waste to comparable programs...
"As a carbon dioxide policy, this is a terribly wasteful thing to do," said Henry Jacoby, a professor of management and codirector of the MIT Joint Program on the Science and Policy of Global Change. "The amount of carbon you are saving per federal expenditure is very, very small."
B) The US needs to save all of the money it can... we should not be artificially stimulating car sales by destroying perfectly drivable cars... it is like during the depression years when the government was destroying perfectly good corn so that they could raise prices for the farmers..... its what governments do best... stupid things...
C) The US cannot afford to be wasting any money right now... the government is running $2,000,000,000,000 deficits (incidentally FOUR TIMES the Bush years deficits- not that he wasn't a terrible president) and we need to ensure that for the safety of our future, our kids future, and the future of the US dollar and the economy, that we be fiscally responsible...
http://abcnews.go.com/Politics/wireStory?id=8316625
They can also buy versions of the 2009 Lexus RX 350 or 2009 Lincoln MKX, both pricey five-passenger utility vehicles that get about 19 mpg and are capable of towing a small boat.........Even a high-end 2009 BMW X3 crossover utility vehicle, priced at just under $40,000, counts as a gas saver eligible under the government program, with 19 mpg.
OmCheeto
Aug13-09, 10:41 AM
A) Maybe it is a good incentive for you.. but at best it pushes a little bit of car sales at the cost of a debt riddled consumer (on the average) and more federal dollars at a huge waste to comparable programs...
I disagree. As I've said before, it will take only 2 years for the 3 billion dollars to be recouped in fuel savings. In 4 years, another 3 billion dollars will be flowing through the economy. Also, the cars should all be paid off by then, which means everyone who bought a car due to the CARS program should have a spare $250-$1000 to pump back into the economy each month.
B) The US needs to save all of the money it can...
I disagree. Saving money is the wrong thing to do right now. Fuzzyfelts husband said so. And I trust fuzzyfelt (http://www.physicsforums.com/member.php?u=23973).
we should not be artificially stimulating car sales by destroying perfectly drivable cars... it is like during the depression years when the government was destroying perfectly good corn so that they could raise prices for the farmers..... its what governments do best... stupid things...
I disagree. I'm not sure what universe you live in, but where I'm from, a perfectly drivable car gets 230 mpg (http://carbonfreeeconomy.com/wp-content/uploads/2008/12/chevy-volt-concept-07.jpg), not 18 or less. I say crush them all.
C) The US cannot afford to be wasting any money right now... the government is running $2,000,000,000,000 deficits (incidentally FOUR TIMES the Bush years deficits- not that he wasn't a terrible president) and we need to ensure that for the safety of our future, our kids future, and the future of the US dollar and the economy, that we be fiscally responsible...
I disagree. And you make it sound like Obama is responsible for the $2 trillion dollar deficit. Bush was in office (http://www.propublica.org/special/government-bailouts) when the first $1 trillion was spent. The fiscal year starts October 1st. But as many economists have pointed out (http://english.aljazeera.net/business/2009/07/200971323573296121.html), if the money hadn't been spent, we'd probably all be working in poor farms and standing in food lines right now.(Ok. I made that up. He said; "But without this help, the downturn would be even more severe")
But this is why I simply adore the CARS program. It's penny ante compared to the TARP and other bailouts. And we get something tangible for it: Shiny new cars! Which might take our minds off the fact that bankrupt business execs are still getting million dollar bonuses (http://abcnews.go.com/Business/wireStory?id=8211048).
Ivan Seeking
Aug13-09, 03:59 PM
A success by pricing some people out of the used car market?
I just found 1000 used cars and trucks for sale in Portland for $500 - $1000.
http://portland.craigslist.org/search/cta?query=&catAbbreviation=cta&minAsk=500&maxAsk=1000
Your arguments are nonsense.
mheslep
Aug13-09, 04:02 PM
I disagree. As I've said before, it will take only 2 years for the 3 billion dollars to be recouped in fuel savings. In 4 years, another 3 billion dollars will be flowing through the economy. Also, the cars should all be paid off by then, which means everyone who bought a car due to the CARS program should have a spare $250-$1000 to pump back into the economy each month. You skipped some steps OmCheeto. You can't claim the fuel savings came from just the ~$4000 federal buy out. Someone had to go and buy a new ~$20k to $30k car to get the fuel savings, so a great deal more than $3 billion is being spent to achieve theoretical savings. Then there's Jevon's paradox, which when applied to cars says people will simply drive more when a mile cost them less.
But this is why I simply adore the CARS program. It's penny ante compared to the TARP and other bailouts. And we get something tangible for it: Shiny new cars!...The buyout program got old cars off the road and their engines spiked. The buyout program nudged people in the direction of new cars, but the new cars came out individual pockets.
Ivan Seeking
Aug13-09, 04:06 PM
The broken glass theory of economics, again?
You are again ignoring the gains in the GDP, which represent wealth not sent to foreign oil suppliers. How many times do you need to be told about this before you understand?
You are again ignoring the gains in the GDP, which represent wealth not sent to foreign oil suppliers. How many times do you need to be told about this before you understand?I'm ignoring nothing. I wish you would refrain from making false personal statements about other people. You are again ignoring the losses in GDP due to the money being taken from the economy, and the loss of the associated wealth creation. (Unless you actually think government is more efficient at wealth creation than the people the money is taken from.)
How many times do you need to be told about this before you understand?
OmCheeto
Aug13-09, 09:29 PM
You skipped some steps OmCheeto. You can't claim the fuel savings came from just the ~$4000 federal buy out. Someone had to go and buy a new ~$20k to $30k car to get the fuel savings, so a great deal more than $3 billion is being spent to achieve theoretical savings. Then there's Jevon's paradox, which when applied to cars says people will simply drive more when a mile cost them less.
The buyout program got old cars off the road and their engines spiked. The buyout program nudged people in the direction of new cars, but the new cars came out individual pockets.
Exactly! The economy has been tanking because people are afraid. The way to get it back on track is to get people buying again. A $3 billion kicker spawned a $12 billion spending spree. Nothing better for an economy than getting money flowing again.
I was probably too succinct in my post. I try not to put people to sleep, as did my economics instructor back at university.
And I don't buy Jevon's paradox in this scenario. I don't drive a single mile further than I used to. I have less money to buy gas with, because I've got a car loan for the next 4 years.
mheslep
Aug13-09, 11:13 PM
Exactly! The economy has been tanking because people are afraid. The way to get it back on track is to get people buying again. A $3 billion kicker spawned a $12 billion spending spree. Nothing better for an economy than getting money flowing again.The people that spend money productively, hiring, investing in new business or projects, are afraid because they do know what stunt the government is going pull next.
And I don't buy Jevon's paradox in this scenario. I don't drive a single mile further than I used to. I have less money to buy gas with, because I've got a car loan for the next 4 years.Yeah, Jevon's must be all BS then.
Ivan Seeking
Aug19-09, 06:53 PM
The Cash for Clunkers program is so successful that it now includes thermal imagers! :rofl:
http://assets.fluke.com/images/email/Thermography/C4C_top_600px.jpg
http://www.emarkmail.com/r.pl?tqfVJZrlW1sFf4vx_6746d3a510d44c74
russ_watters
Aug19-09, 08:59 PM
One marketing gimick begets another! :rolleyes:
bleedblue1234
Aug20-09, 11:59 AM
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Go to 7:20
Ivan Seeking
Aug20-09, 02:46 PM
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Go to 7:20
He ignores:
Payback perhaps 2 or 3 times in GDP
Payback in health benefits by reducing emissions
Payback in reduced reliance on foreign suppliers for energy
Payback in reducing the danger to existing drivers of fuel efficient vehicles, by taking more of the monster SUVs and monster trucks off the road.
Payback later for poor people who will have greater access to more fuel-efficient vehicles.
Payback over not just the remaining life of the gas hog traded in, but also over the entire life of each new small car that would have been another gas guzzling SUV or truck, were it not for the cash for clunkers program.
Given that this is a money maker and not a money loser, he ignores the tremendous stimulus to the economy provided by a quick injection of several billion dollars. He ignores the pressure that this helps to put on auto makers to produce more fuel-efficient cars that can compete. He ignores the cost of maintaining old vehicles, lost productivity due to transportation problems, as well as the fact that the most important thing to get the economy moving again is to increase consumer spending. The fact is that most of these cars probably wouldn't have lasted much more than five years, and those that would have would be increasingly offensive to everyone as they began to belch smoke, guzzle even more gas, and put everyone on the road in jeopardy as the vehicles grow unsafe and unreliable. He also assumes that people who can't afford to buy a car are buying one when they don't need to, when in fact there are many people who need to buy couldn't, but now can because of the inflated value of their old car. Also, there is nothing more beautiful than an SUV in a car crusher. Now the beasts can be recycled and the materials put to productive use.
The cash for Clunkers program is a win win win, which is why it is probably the most successful government program of its kind seen in this country any time in the last forty years. The biggest problem is that it was so successful that the payment system has been overwhelmed. Obama said today that they have hired three or four times the number of people planned while trying to respond to the incredible demand for payment, from auto dealers all over the country. The only thing wrong with this program is that it has been too successful for the paperwork stream.
mheslep
Aug20-09, 04:25 PM
He ignores:
Payback perhaps 2 or 3 times in GDP...Where are you getting this?
bleedblue1234
Aug20-09, 11:06 PM
Payback perhaps 2 or 3 times in GDP
where are you getting this from?
Payback in health benefits by reducing emissions
again subjective, and what scientific study has been done about this, much less how much emissions are being reduced (most scientists say an extremely small percentage)
Payback in reduced reliance on foreign suppliers for energy
ok.... but we are not buying all electric vehicles, and also we are buying foreign cars (to some effect). And you forgot to add in the fact that we are paying for these new cars through financing from abroad and at a cost of a debt riddled consumer... (that can't afford to buy a car)....
Payback in reducing the danger to existing drivers of fuel efficient vehicles, by taking more of the monster SUVs and monster trucks off the road.
Again, statistics please and why can't we phase them out over a lengthy period of time rather than permanently destroying capital and perfectly drivable vehicles....
Payback later for poor people who will have greater access to more fuel-efficient vehicles.
again if they cannot afford to buy a car, they shouldn't ... its economic suicide in the long term.... for them and for society...
Payback over not just the remaining life of the gas hog traded in, but also over the entire life of each new small car that would have been another gas guzzling SUV or truck, were it not for the cash for clunkers program.
Again the small gain vs. the enormous cost to the consumer and the government....
Given that this is a money maker and not a money loser
again I don't see how this can be true. we are destroying our own capital that is owned by a society free and outright, it is absolutely ludicrous to think it is more cost-effective to destroy our own cars and buy cars on credit.... you have a false interpretation of how the system works....
he ignores the tremendous stimulus to the economy provided by a quick injection of several billion dollars
you ignore the cost of the artificial demand spike and the cost of funneling capital from productive areas of the economy to consumer spending on cars that don't need to be purchased, several economists have said that this will reduce overall economic activity because people now have a new car payment to take care of, and we need to be saving in the first place.... we need to save our money to rebuild productive parts of this economy....
He ignores the pressure that this helps to put on auto makers to produce more fuel-efficient cars that can compete
maybe so, but if it is economical to produce cars that aren't fuel efficient and that people will still purchase, then that is what car makers should do... if the government got out of the way a long time ago and did not subsidize oil through inflation and all of this other mess of things, we would not be in this problem...
He ignores the cost of maintaining old vehicles, lost productivity due to transportation problems, as well as the fact that the most important thing to get the economy moving again is to increase consumer spending
again you see consumer spending as healthy, when infact we need to model much of what china has done and save and rebuild our industries and financial sectors.... while we should not and cannot seize spending, we need to reallocate capital to producers rather than consuming vehicles...
Transporting problems?
what about the cost of melting down the vehicles... and the cost of debt to the overall economy... consumers will have less money to spend on other expenses that they may need..
The fact is that most of these cars probably wouldn't have lasted much more than five years
So... thats five years of usable driving period that is wasted and a usable product that is destroyed (again I don't know where you are getting these facts)....
and those that would have would be increasingly offensive to everyone as they began to belch smoke, guzzle even more gas, and put everyone on the road in jeopardy as the vehicles grow unsafe and unreliable.
again complete BS and liberal BS... an old car that passes all emissions tests is certified... why should we destroy it if it runs?
He also assumes that people who can't afford to buy a car are buying one when they don't need to, when in fact there are many people who need to buy couldn't, but now can because of the inflated value of their old car. Also, there is nothing more beautiful than an SUV in a car crusher. Now the beasts can be recycled and the materials put to productive use.
Huh? destroying capital is a good thing? where do you live? mars.... we are wasting perfectly good capital that took labor, energy, and time to produce, and exchanging it at a cost for scrap...
The cash for Clunkers program is a win win win, which is why it is probably the most successful government program of its kind seen in this country any time in the last forty years.
uh huh... ya.... whatever you say bosss.....
The biggest problem is that it was so successful that the payment system has been overwhelmed. Obama said today that they have hired three or four times the number of people planned while trying to respond to the incredible demand for payment, from auto dealers all over the country. The only thing wrong with this program is that it has been too successful for the paperwork stream.
again people hired at a cost to taxpayers and a reallocation of capital that is artificial, once the program ends the demand will cease and we will be faced with issues of mis-allocated capital and more government spending... which we certainly do not need.....
Thanks come again...
mheslep
Aug20-09, 11:22 PM
Also, there is nothing more beautiful than an SUV in a car crusher. Now the beasts can be recycled and the materials put to productive use.such as making more SUVs. Don't forget the top ten replacement purchases include two small SUVs (Escape and Patriot) and two trucks (F150 and Silverado)
From Edmunds (via CNN):
1 Ford Escape (4WD SUV hybrid)
2 Ford Focus (sedan)
3 Jeep Patriot (4WD SUV)
4 Dodge Caliber (4WD)
5 Ford F-150 (4WD Truck)
6 Honda Civic (sedan)
7 Chevrolet Silverado (4WD Truck)
8 Chevrolet Cobalt
9 Toyota Corolla (sedan)
10 Ford Fusion (4WD hybrid)
http://money.cnn.com/2009/08/07/autos/cash_for_clunkers_sales/index.htm
russ_watters
Aug21-09, 12:03 AM
Payback perhaps 2 or 3 times in GDP. Ivan, you're misusing the word "payback". Payback is a measure of return on investment. It means putting $10 in and getting $20 or $30 back (and usually also includes a timeframe for 1:1 payback). With the CARS program, you are probably saying that since the government puts in $4500 and the buyers put in $9000-$13,500, that that's a "payback" of 2-3x. But that's not payback, that's just a multiplier. The incentive is intended to multiply its own effect. I guess you could say it's "pay" without the "back". But that's an important difference:
The money starts off free, which in a payback calculation is zero payback (infinite ROI), but that's because it is borrowed money. The ROI drops over time, though, as the money accrues interest and has to be paid back. Whether the stimulus of the money going around in circles will outweigh the loss due to interest and unavailability of the money for future spending is not an easy question to answer. Adding in the fact that capital is being destroyed implies strongly to me, though, that it can't be anything but a loser. In other words, the final "pay" into the GDP isn't going to be 2x to 3x, it is going to be 0x or less.
Certainly, though, all of the benefit is front-loaded, coming over last month and next month and all of the cost comes later. That is, of course, one of the primary complaints of most people who oppose the idea. It will give a 1 quarter boost to the GDP and then lower the gdp for the next 5 years. As with most of his stimulus plans, if he succeeds in actually spending the money, he'll pull us out of the recession sooner than we would have gotten out on our own (perhaps a month or two sooner), but he'll keep the GDP down and unemployment up for the next decade or more. I'm not a big fan of trying for a 6 month improvement at the expense of the next 10 years.
The cash for Clunkers program is a win win win, which is why it is probably the most successful government program of its kind seen in this country any time in the last forty years. The biggest problem is that it was so successful that the payment system has been overwhelmed. Obama said today that they have hired three or four times the number of people planned while trying to respond to the incredible demand for payment, from auto dealers all over the country. The only thing wrong with this program is that it has been too successful for the paperwork stream.If we judge success by how well the program did at giving taxpayer money away and destroying wealth, sure it's a success. Gee, more people wanted to take the loot than we thought when we offered it, big success. :rolleyes:
russ_watters
Aug21-09, 12:17 AM
Didn't you know, Al67, popularity*=success! :rolleyes:
So I think the government should start dropping bundles of hundred dollar bills from helicopters at sporting events. That would be so much more successful, not to mention efficient: it's fast and there's no paperwork!
*Popularity with the people being handed the money.
mheslep
Aug21-09, 12:38 AM
Ivan, you're misusing the word "payback". Payback is a measure of return on investment. It means putting $10 in and getting $20 or $30 back (and usually also includes a timeframe for 1:1 payback). With the CARS program, you are probably saying that since the government puts in $4500 and the buyers put in $9000-$13,500, that that's a "payback" of 2-3x. But that's not payback, that's just a multiplier. The incentive is intended to multiply its own effect. I guess you could say it's "pay" without the "back". But that's an important difference:
The money starts off free, which in a payback calculation is zero payback (infinite ROI), but that's because it is borrowed money. The ROI drops over time, though, as the money accrues interest and has to be paid back. Whether the stimulus of the money going around in circles will outweigh the loss due to interest and unavailability of the money for future spending is not an easy question to answer. Adding in the fact that capital is being destroyed implies strongly to me, though, that it can't be anything but a loser. In other words, the final "pay" into the GDP isn't going to be 2x to 3x, it is going to be 0x or less.
Certainly, though, all of the benefit is front-loaded, coming over last month and next month and all of the cost comes later. That is, of course, one of the primary complaints of most people who oppose the idea. It will give a 1 quarter boost to the GDP and then lower the gdp for the next 5 years. As with most of his stimulus plans, if he succeeds in actually spending the money, he'll pull us out of the recession sooner than we would have gotten out on our own (perhaps a month or two sooner), but he'll keep the GDP down and unemployment up for the next decade or more. I'm not a big fan of trying for a 6 month improvement at the expense of the next 10 years.
Yes this is best described as a multiplier effect, if there is one, and not a payback. I suspect since Ivan mentioned GDP he's alluding to the fiscal multiplier (http://en.wikipedia.org/wiki/Fiscal_multiplier) theory that's the basis of all the stimulus. There's an argument that fiscal stimulus has a multiplier greater than one. In the the case of the overall stimulus Obama's econ. advisor Romer had it at ~1.5 (http://otrans.3cdn.net/45593e8ecbd339d074_l3m6bt1te.pdf) (pg 12) or so. There are also professional arguments claiming it is much lower, like .5. (http://www.voxeu.org/index.php?q=node/3373) Nobody claims 2 or 3x multipliers.
TheStatutoryApe
Aug21-09, 08:36 AM
Payback in reducing the danger to existing drivers of fuel efficient vehicles, by taking more of the monster SUVs and monster trucks off the road.
Does it? SUVs are perfectly acceptable replacements under the rules of the Cash for Clunkers program. If you trade in an SUV the improvment in fuel efficiency required of the replacement is much smaller and if your SUV happens to be a super large 'class 3 vehicle' you can only trade it in for another SUV and it only needs to have a one mile to the gallon improvement in fuel efficiency.
Payback later for poor people who will have greater access to more fuel-efficient vehicles.
You mean maybe lower middle class people? Most actual poor people buy used so that they don't have to worry about car payments and severely hiked insurance rates. Cash for Clunkers means a whole crap load of used vehicles that will not be on the market, nor will their parts be available for fixing the old cars of the actual poor people who still could not have afforded to buy a new car even with the free money, AND the actual poor people will still be unable to afford to buy themselves new cars.
Payback over not just the remaining life of the gas hog traded in, but also over the entire life of each new small car that would have been another gas guzzling SUV or truck, were it not for the cash for clunkers program.
See above. Many of those trade ins just became newer slightly less gas guzzling trucks and SUVs.
No more kool aid for you Ivan!
CRGreathouse
Aug21-09, 09:18 AM
So I think the government should start dropping bundles of hundred dollar bills from helicopters at sporting events. That would be so much more successful, not to mention efficient: it's fast and there's no paperwork!
Exactly! You'll only have to drop $250,000 per stadium, but the people will pay a total of $2.5 million to go to the game. And if you drop big bills (and encourage businesses to not have enough change!) you'll get a multiplier effect because people will pick up a $500 bill and put in money of their own to round out the purchase.`
CRGreathouse
Aug21-09, 09:32 AM
If you trade in an SUV the improvment in fuel efficiency required of the replacement is much smaller and if your SUV happens to be a super large 'class 3 vehicle' you can only trade it in for another SUV and it only needs to have a one mile to the gallon improvement in fuel efficiency.
Source?
jimmysnyder
Aug21-09, 10:08 AM
I suppose that if I had a clunker with a trade-in value of $4501, I would not take advantage of this program in any case. If I had a clunker with a trade-in value of $4499, then I might consider it, but I wouldn't buy a car for the sole purpose of cadging a dollar off some other poor taxpayer, I would have to actually need the car I was buying. If I had a clunker with a trade-in value of $1, then I essentially have a ticket worth $4499, but only if I use it. If I have need of a car, I've hit the jackpot. On the other hand, if I don't need a car I still might find some way to monetize the clunker. Perhaps I can sell the new car for $3000 less than I paid for it and pocket $1499. Bottom line, I am unlikely to take advantage of this program unless I need a car, and am willing to buy a new one. Has anyone calculated the effect of this program on sales in the coming months. How much has the demand from that period been scrunched up into these past few weeks? Has there been any real increase in demand for new cars as a result of this program?
russ_watters
Aug21-09, 10:43 AM
Exactly! You'll only have to drop $250,000 per stadium, but the people will pay a total of $2.5 million to go to the game. And if you drop big bills (and encourage businesses to not have enough change!) you'll get a multiplier effect because people will pick up a $500 bill and put in money of their own to round out the purchase.` Of course, just like with the clunkers which would eventually get phased out anyway (people do eventually replace their cars), Phillies and Eagles games are already sold out...
russ_watters
Aug21-09, 10:46 AM
I suppose that if I had a clunker with a trade-in value of $4501, I would not take advantage of this program in any case. If I had a clunker with a trade-in value of $4499, then I might consider it, but I wouldn't buy a car for the sole purpose of cadging a dollar off some other poor taxpayer, I would have to actually need the car I was buying. If I had a clunker with a trade-in value of $1, then I essentially have a ticket worth $4499, but only if I use it. If I have need of a car, I've hit the jackpot. On the other hand, if I don't need a car I still might find some way to monetize the clunker. Perhaps I can sell the new car for $3000 less than I paid for it and pocket $1499. Bottom line, I am unlikely to take advantage of this program unless I need a car, and am willing to buy a new one. Has anyone calculated the effect of this program on sales in the coming months. How much has the demand from that period been scrunched up into these past few weeks? Has there been any real increase in demand for new cars as a result of this program?Not sure if anyone has calculated the effect (don't worry - it won't take long to see it), but plenty of people have pointed out that it is likely the effect is more a shifting of car sales than an actual increase in car sales.
mheslep
Aug21-09, 11:06 AM
Sales are definitely up from January's lows, but it is impossible to isolate the cause given the recession.
http://online.wsj.com/article/SB124931253429401705-email.htmlhttp://online.wsj.com/article/SB124931253429401705.html#project%3DAUTOS90218%26a rticleTabs%3Dinteractive
...The closely watched annualized selling pace rose to 11.24 million vehicles, a significant jump from June's 9.69 million rate. But it was down from the year-ago pace of 12.5 million sales, and still far short of the 16 million annual level once considered normal.
GM and Chrysler Group LLC suffered their smallest sales declines of the year. GM sales fell 19.4% to 188,156 vehicles, while Chrysler's fell 9.4% to 88,900. Toyota Motor Corp. said sales slipped 11% to 174,872 vehicles, and estimated that clunkers deals boosted sales by 30,000 to 32,000 vehicles.
Ford, meanwhile, said its July light-vehicle sales rose 2.4% from a year ago to 164,795 -- the company's first year-over-year gain in 20 months.
OmCheeto
Aug21-09, 11:23 AM
Has anyone calculated the effect of this program on sales in the coming months. How much has the demand from that period been scrunched up into these past few weeks? Has there been any real increase in demand for new cars as a result of this program?
I'd say that it was just a matter of time before last years potential buyers went shopping.
For the full year of 2008, all of the Big Six automakers reported sales declines. In total, the industry sold 13.2 million vehicles for an 18 percent drop from 2007's 16.1 million. (ref) (http://www.autoobserver.com/2009/01/2008-us-auto-sales-are-worst-since-1992.html)
I don't think it is something one can calculate without knowing the thoughts and bank balances of 300 million people. They simply held on to their old cars for 6 years instead of 5. I don't see that the 3 million car sales deficit needs to be evened out with a 3 million car sales surplus.
I think that the only thing we need is for auto sales rates to stabilize at their previous level.
bleedblue1234
Aug21-09, 12:11 PM
snip
I think that the only thing we need is for auto sales rates to stabilize at their previous level.
:rofl:
I hope this is a joke.
To get auto sales at previous levels we would have to have a MASSIVE infusion of brand new capital and new money sloshing around, and people would have to be insane to go on the same spending binge that threw the economy off of a cliff.
The real baseline demand for vehicles isn't there anymore... we don't have excess foreign dollars sloshing around the country, we can't use our houses as ATM's... the demand levels are crashing to what they should have been all along. People are buying cars only when they actually need to purchase them, not when the next late model Lexus rolls off the factory line... and that is how it should be, especially with the current fiscal situation of everyone in this country, government included.
You live in a dream world...
OmCheeto
Aug21-09, 09:20 PM
:rofl:
I hope this is a joke.
Nope.
To get auto sales at previous levels we would have to have a MASSIVE infusion of brand new capital and new money sloshing around, and people would have to be insane to go on the same spending binge that threw the economy off of a cliff.
I disagree.
The real baseline demand for vehicles isn't there anymore...
?
we don't have excess foreign dollars sloshing around the country, we can't use our houses as ATM's...
Ha ha! You got me there. I bought my house for $22k, and now 20 years later, I owe $40k!
It was fun while it lasted though. Thank god it's still worth $150k, or I'd be screwed if I lost my job.
the demand levels are crashing to what they should have been all along. People are buying cars only when they actually need to purchase them, not when the next late model Lexus rolls off the factory line...
I kind of agree with you here also. I average 50 years between new car purchases.
and that is how it should be, especially with the current fiscal situation of everyone in this country, government included.
Actually, 'everyone' is a bit of an exaggeration. I'm actually doing quite well.
You live in a dream world...
Now that, is the only fact that I have ever noticed to roll off the ends of your fingers.
TheStatutoryApe
Aug21-09, 09:57 PM
Source?
I already linked articles regarding this earlier in this very thread.
Edit:
http://www.politicsdaily.com/2009/08/04/cash-for-hummers-taxpayers-foot-the-bill-for-guzzler-upgrades/
http://money.cnn.com/2009/07/29/autos/clunker_tips/?postversion=2009073013
Note: I believe I misread one of the articles. You may not have to trade a catagory 3 for another truck but you can and there are no fuel efficiency rules for them since they are not rated by the EPA.
bleedblue1234
Aug22-09, 01:36 PM
Dough for Dumps?
After having given away billions faster than even the optimists had anticipated, it was announced today that the federal government's "Cash for Clunkers" program is coming to an early end. But, based on the standards of economic analysis which prevail in Washington, Wall Street and academia, the program must be considered a master stroke of public policy. These experts will tell you that by mandating that citizens destroy older (but still working) vehicles to receive $4,500 toward the purchase of a new car, the program not only revved up the economy by encouraging Americans to borrow more, but it may have, perhaps, made some great strides in saving the planet by reducing carbon emissions.
With this solid win-win now on the books, the time has come to put the strategy to work in other areas. For instance, the government could use these lessons learned to help the moribund housing sector. I propose the "Dough for Dumps" stimulus program. Here's how it would work:
Homeowners struggling to make payments on environmentally inefficient homes can apply for government aid to destroy their old homes and receive guaranteed loans to buy newly constructed houses, provided they are furnished with the latest "green" advancements in energy systems and building materials. As with the "Cash for Clunkers" program, this plan would solve many problems at once.
First, it will help put a floor under falling home prices by reducing the glut of houses currently on the market. The best way to stop prices from falling, and thereby reduce the foreclosure wave, is to reduce supply.
Left alone, the market would do this by lowering prices, which would bring more buyers into the market. But this approach falls on the back of homeowners whose only crime was to overpay for a house. A more socially equitable method would be for all taxpayers to shoulder the burden through a government bulldozing program.
In addition to contracting the supply of homes, the program would also stimulate the economy by providing funds to hire environmentally savvy builders and contractors (not to mention the workers needed to demolish the old homes). The resulting demand would help to reduce unemployment, especially in the housing sector. Government incentives and subsidies could also give an important boost to the developers and manufacturers of "green" windows, solar heating systems, furnaces and water systems.
Once this program has rejuvenated the real estate market, citizens should also be encouraged to burn their old furniture and clothing, thereby sparking demand for new goods from our nation's struggling retailers. When you think about it, the possibilities are endless.
If these proposals seem ridiculous, it is because they are. But they are no less ridiculous than the "Cash for Clunkers" program that inspired them. All are examples of the "broken window" fallacy of economics, which argues that economic activity can be stimulated by the need to replace something that has been destroyed.
Unfortunately, many of our "best" economists subscribe to the notion. But society gains nothing from redundant activities. Digging holes just to fill them up does employ workers, but the work offers no benefit to anyone not receiving the wage. Absent government incentives, such a job would create no profit and could only exist as a result of a subsidy from someone else. Such work also prevents workers from accomplishing tasks that create real wealth and actually benefit society.
In the case of "Cash for Clunkers," the government provided an incentive for citizens to destroy otherwise working assets, fully owned by their users, in exchange for a smattering of "green" tech and a lot more debt. Could anyone look at our country now and determine that our problems stem from a lack of new cars? Given our level of economic output, it is likely that we already have too many cars. On the other hand, it should be obvious to anyone that American consumers are already burdened by too much debt. The program distorts the market by giving car owners a powerful incentive to take out new loans for cars they may not need.
The environmental benefits of the program are much more difficult to quantify and extremely unlikely to overcome the waste inherent in the wanton destruction of working assets. On a practical level, the premature shelving of working cars will add extra pressures to our waste management capacity, and create emissions and pollution through the compaction/incineration processes that accompanies disposal. On an abstract level, this program punishes every consumer who sought to be ahead of the curve in environmental responsibility by using their own resources to upgrade a clunker. Some may think twice before making such a move without government money on the table.
More fundamentally however is the question of making wise decisions in a recession. Given the fragility of our finances, we should use our resources wisely, pay down our debt, replenish our depleted savings, and make investments in time and energy that offer a tangible benefit. The "Cash for Clunkers" program is the exact opposite of what we need and a glaring example of the lack of economic understanding currently on tap in Washington.
This comes in from an interesting corner, the Germans. Interesting in that they and others declined to follow the US down so large a stimulus path, despite US prodding (initially). This German economist say's the fiscal multiplier from traditional government deficit spending under these circumstances is, well, there is none.
http://www.voxeu.org/index.php?q=node/3949
Volker Wieland
Professor for Monetary Theory and Policy in the House of Finance at Goethe University of Frankfurt and Director of the Center for Financial Studies
...Our findings confirm the earlier analysis with models of the US economy. Once you allow for a significant role of forward-looking behaviour by households and firms, there is no multiplier. The expectation of future tax increases, or rising government debt and future interest rate increases leads to a reduction in private consumption and investment spending. This holds in particular for the three New Keynesian models developed by economists at the ECB, the IMF and the EU Commission (see Smets and Wouters 2003, Laxton and Pesenti 2003, and Ratto, Roeger and in’t Veld 2009)...
(Hat tip to Prof Mankiw)
So the CARS program according to this theory stimulated some new car sales in August 2009, got some of the worst gas hogs off the road, but nothing more economically.
mgb_phys
Sep9-09, 09:50 AM
So the CARS program according to this theory stimulated some new car sales in August 2009, got some of the worst gas hogs off the road, but nothing more economically.
It depends - the report says;
"The expectation of future tax increases, or rising government debt and future interest rate increases leads to a reduction in private consumption and investment spending"
So people who think that the government will somehow have to pay for this in the future - which means they will have to pay for it - hung onto their money. The others went 'ooh free money' and borrowed to buy a new car.
It depends - the report says;
"The expectation of future tax increases, or rising government debt and future interest rate increases leads to a reduction in private consumption and investment spending"
So people who think that the government will somehow have to pay for this in the future - which means they will have to pay for it - hung onto their money. The others went 'ooh free money' and borrowed to buy a new car.The applies equally to everyone, car purchase or no. The CARS people can also fall into the same 'expectors' category, by cutting back other future spending to balance out the car payment they've now incurred. Then there is no net stimulative effect if net spending remains flat.
Ivan Seeking
Sep9-09, 01:49 PM
So the CARS program according to this theory stimulated some new car sales in August 2009, got some of the worst gas hogs off the road, but nothing more economically.
Again you ignore the reduction in lost wealth by reducing demand for imported oil. That is where we find the real multiplier for the CARS program.
mgb_phys
Sep9-09, 01:50 PM
The CARS people can also fall into the same 'expectors' category, by cutting back other future spending to balance out the car payment they've now incurred. Then there is no net stimulative effect if net spending remains flat.
But theres no need to cut back on anything - interest rates on credit cards are really low, so you can just put the payments on the credit card. If it becomes a problem the house is worth $500,000 - it's just a temporary glitch in the market.
And if the borrowing becomes a problem - well you can always have another bailout ;-)
Again you ignore the reduction in lost wealth by reducing demand for imported oil. That is where we find the real multiplier for the CARS program.I hope CARS reduces imported oil, but that's not a fiscal multiplier effect as addressed by the above.
A parallel example to clarify: say the government funds a new/repaired bridge. The first possible benefit, outlined by the fiscal multiplier theory, addresses the possibility that the bridge money flows into bridge company pockets, then into employee and supplier pockets, and so on. Along the way the theory is that more total spending occurs than was originally spent by the government. (The economist Wieland above says this is unlikely). The second possible benefit obtained by the bridge is improved infrastructure (that parallels the possible lowered demand for oil in CARS), i.e, it enables greater transportation efficiency (or not - they can also be useless boondoggles - bridges to nowhere). The point is that fiscal stimulus and infrastructure improvement are two different things.
But theres no need to cut back on anything - interest rates on credit cards are really low, so you can just put the payments on the credit card. If it becomes a problem the house is worth $500,000 - it's just a temporary glitch in the market....In your case, good for you. Reread the source. At least some respected macroeconomic models say people will expect increasing tax rates and interest rates in the future due to the present large increases in government deficit spending. In anticipation of that, those models predict people will cut back on spending and investment now.
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