Spending Cap, Cash for Clunkers, and Unemployment

Grant Bosse joins "Meet the New Press", which airs 9-11 on WEMJ, and streams live at GraniteGrok.com. Grant will be on at 9:35am. Check out their complete lineup.

The NH Watchdog, AKA Grant Bosse, the Lead Investigative Reporter for the Josiah Bartlett Center, joins us to chat the passage of the Manchester Spending Cap, the dismal October revenue report for NH, and the final numbers on the cash for clunkers debacle. Time permitting, we'll get his take on the latest unemployment figures. Stimulus saved jobs? Really?

Clunker pickups traded for new pickups

The Associated Press does some old-fashioned investigation and finds that the Cash for Clunkers program help pick-up owners trade-in their gas-guzzling trucks, for new trucks.

The single most common swap — which occurred more than 8,200 times — involved Ford F150 pickup owners who took advantage of a government rebate to trade their old trucks for new Ford F150s. They were 17 times more likely to buy a new F150 than, say, a Toyota Prius. The fuel economy for the new trucks ranged from 15 mpg to 17 mpg based on engine size and other factors, an improvement of just 1 mpg to 3 mpg over the clunkers.

Owners of thousands more large old Chevrolet and Dodge pickups bought new Silverado and Ram trucks, also with only barely improved mileage in the middle teens, according to AP's analysis of sales of $15.2 billion worth of vehicles at nearly 19,000 car dealerships in every state. Those deals helped the Ford F150 and Chevy Silverado — along with Ford's Escape midsize SUV — climb into the Top 10 most-popular vehicles purchased with the government rebates. The most common truck-for-truck and truck-for-SUV deals totaled at least $911 million.

I've been describing the Cash for Clunkers program as a boondoogle, but I'm beginning to think debacle is bit more on the nose. What do you think?

Cash for whom? Clunkers program a lemon

The Union Leader calls the "Cash for Clunkers" program a "colossal economic failure".

What that means is that instead of an average taxpayer cost of $4,000 per vehicle, as the Obama administration claims, the program's actual cost was $24,000 for each vehicle that otherwise would not have been sold.

And what did all that cash buy the American people? Detroit and the White House say it boosted auto production and stimulated the economy when it needed the most stimulating. But think about that. The government paid people $226 billion to buy cars in the summer instead of later in the year.

Using tax dollars to subsidize the destruction of functional automobiles is a remarkably silly idea, even if the government had been able to come up with some statistics to defend the program. But now we know that most of the people who trashed their used cars to get the program's benefit would have bought a new car even without the fatally flawed program.

Cash for Clubbers

The Wall Street Journal has discovered yet another government giveaway program tucked into the federal stimulus bill. Did you know there's a tax credit for buying an electric car ... and that it applies to electric golf carts?

Congress's fabulous golf cart stimulus.

We thought cash for clunkers was the ultimate waste of taxpayer money, but as usual we were too optimistic. Thanks to the federal tax credit to buy high-mileage cars that was part of President Obama's stimulus plan, Uncle Sam is now paying Americans to buy that great necessity of modern life, the golf cart.

The federal credit provides from $4,200 to $5,500 for the purchase of an electric vehicle, and when it is combined with similar incentive plans in many states the tax credits can pay for nearly the entire cost of a golf cart. Even in states that don't have their own tax rebate plans, the federal credit is generous enough to pay for half or even two-thirds of the average sticker price of a cart, which is typically in the range of $8,000 to $10,000. "The purchase of some models could be absolutely free," Roger Gaddis of Ada Electric Cars in Oklahoma said earlier this year. "Is that about the coolest thing you've ever heard?" (more)

'Clunker effect' felt in NH tax revenues

The Union Leader reports that the Cash for Clunkers binge has caused a spike in local car registration revenues.

In one town, a two-month increase in automobile registration fees helped to reduce a $40,000 shortfall in the auto registration line item by 25 percent. Others are swamped with new car registrations.

"I can tell you I've had to make a special trip to Concord today to pick up more registration decals, and it's the third time this month I've run out," Windham Town Clerk Nicole Miller said.

More than 5,000 new cars were purchased in New Hampshire under Cash for Clunkers, which offered rebates of $3,500 to $4,500 for trade-ins of old, gas-guzzling autos for new cars.

"We (the clerk's association) had an executive board meeting just last week, and the thing everyone was talking about was all the new car registrations we've been seeing," said Kathy Seaver, president of the New Hampshire City and Town Clerks Association.

We'll see how much auto registrations fall once the sugar buzz of Cash for Clunkers wears off.

Selling out to socialists in a shiny new car

Rick Fabrizio, Managing Editor of the Portsmouth Herald, has a tongue in cheek (we think) article about buying a new car through the Cash for Clunkers program.

By RICK FABRIZIO
August 30, 2009 2:00 AM

I am the proud driver of a shiny new car, purchased with $4,500 of government aid through its "Cash for Clunkers" program.

My purchase was quick and easy. So, I drive happily along as a big fan of the economic/environmental stimulus package. When I see other shiny new cars on the road proudly adorning temporary license plates, I give the drivers a thumbs-up, maybe even a wink depending on the driver.

It's like the 1990s when everyone was making scads of cash and were buying SUVs and German sports cars. Well, it's not exactly like the '90s in that there were no public dollars for those rides, but if you think about it, the '90s cash was just as fake as the federal dollars being churned out today. (more)

Let's destroy a perfectly good truck

It's painful to watch your tax dollars going into the destruction of a perfectly good truck.

This video cost us between $3500 to $4500. Did you get your money's worth?

And if you're a Corvette fan, you'd better leave now.


Hattip: Carpe Diem

Latest in Stimulus: 'Cash for Refrigerators'

It's almost too incredible to believe. But since Congress is involved we know that nothing is too far fetched. Here's an idea, let's borrow money from the Chinese government so we can give rebates to Americans who buy electronic products made in China. And just to make it fun let's have each state come up with its own rules for what people can and can't buy.

BusinessWeek
By Matthew Boyle
Mon Aug 24, 8:08 am ET

A $300 million cash-for-clunkers-type federal program to boost sales of energy-efficient home appliances provides a glimmer of hope for beleaguered makers of washing machines and dishwashers, but it's probably not enough to lift companies such as Whirlpool and Electrolux out of the worst down cycle in the sector's history.

Beginning late this fall, the program authorizes rebates of $50 to $200 for purchases of high-efficiency household appliances. The money is part of the broader economic stimulus bill passed earlier this year. Program details will vary by state, and the Energy Dept. has set a deadline of Oct. 15 for states to file formal applications. The Energy Dept. expects the bulk of the $300 million to be awarded by the end of November. (Unlike the clunkers auto program, consumers won't have to trade in their old appliances.)

(more)

A Clunker of a Government Program

Guest Post by Jason Bedrick
Former State Representative

Almost three years after the passing of the great economist, Milton Friedman, the pooh-bahs who run our government have all but forgotten his exhortation to judge government programs by their outcomes, not the intentions of their designers.

The "Cash for Clunkers" program, which ends today, is a classic example of a well-intentioned program rife with unintended consequences. Proponents of the program argue that it will stimulate the economy and reduce the "carbon footprint" of America's automobiles. However, the actual outcome of the program is far from what was intended.

There are three groups of people who utilized the program:

1) Those who were going to buy a car anyway.

2) Those who can afford a new car, but weren't going to buy one because their car works well.

3) Those who can't afford a new car without the program.

Those who were already going to purchase a new car received some "free" money from their neighbors, often to purchase a more expensive model. That doesn't stimulate the economy, it merely robs some citizens of their hard-earned income to pay for their neighbor's new automobile.

Moreover, by persuading some to purchase a car who otherwise would not have, the government harmed other industries. As Jonah Goldberg has noted, this is the "unseen" aspect of the program. While the program encouraged car sales, it slowed sales in other industries in a way that's all but impossible to quantify. Those in the second group would have otherwise purchased electronics, home furnishings, or any number of other products. In this sense, "Cash for Clunkers" is really a handout to Obama's friends at United Auto Workers. Obama stole General Motors away from the bondholders who put their own money at risk to keep it afloat, violated their contracts, and gave a majority ownership to the UAW. Now Obama is favoring the UAW and the entire auto industry (including foreign manufacturers) at the expense of other industries. When politicians interfere with the economy, they ultimately make political, not economic decisions.

Finally, there are those who couldn't afford a new automobile, yet chose to buy one using taxpayer money. How short is the memory of our political class? The program is creating a bubble just like Fannie Mae and Freddie Mac did for houses. What happens when, years later, those in the third group can't afford to pay off their car loans? Answer: The same thing that happened when the government gave people an incentive to purchase homes they couldn't afford. The bubble will burst and there will be an outcry for another government handout (i.e. -- wealth redistribution from the responsible to the irresponsible).

But at least we're saving energy, right? Well, not quite. Aside from being wasteful, the government policy to destroy all automobiles traded in through the "Cash for Clunkers" program -- whether or not they are serviceable -- consumes a lot of energy. So does producing new ones. Millions of people who might have purchased fuel-efficient used cars instead had their vehicles destroyed and purchased a new ones. As the editors of National Review noted, "a 1994 Geo Metro gets mileage as good as the Prius’s without incurring the 13 million BTUs of energy necessary to build a new one."

In short, the "Cash for Clunkers" program failed to meet either of its goals. Instead, we're left with wealth transfers, market distortions, more citizens in debt, and the wasteful destruction of serviceable vehicles. We can take some measure of solace in the fact that it was one of few "temporary government programs" which actually turned out to be temporary, but it's still a shame that it was ever given an opportunity to wreak so much havoc in the first place.

Cash for Clunkers: Success is a matter of perspective

It would be nice to think that we've finally heard the last of the Cash for Clunkers program. Unfortunately it seems like every day yet another story emerges to remind us why Congress should resist the temptation to meddle in the free market. Maybe politicians, like doctors, should take an oath to first do no harm ...

Program became 'nightmare' for dealers, customers
By Michael McCord
August 23, 2009 6:00 AM

When FS Gilbert of Rollinsford went to a local dealer in Dover to take advantage of the "Cash for Clunkers" program, he was quickly approved to trade in his 2000 Windstar van for a more fuel-efficient automobile.

Nearly a month later, Gilbert will take possession of his new ride today. According to Gilbert, the Dover dealership said it had still not received approval from the National Highway Traffic Safety Administration but was going to release the car to him. Gilbert is not alone in his frustration on the bumpy road to a new car — as of Thursday, 90 to 95 percent of applications nationwide had yet to get either NHTSA approval for their deals or been paid the $3,500 to $4,500 rebate. (more)

Wait until the books are closed

As the latest Obama wealth redistribution program - Cash for Clunkers - stumbles to an end the Foster's Daily Democrat wonders about the program's long-term impact on the economy.

Saturday, August 22, 2009

The Obama administration's Cash for Clunkers program comes to an end Monday, but there are auto dealers throughout America who are wondering when they will be reimbursed.

It is not a case of "the check is the mail," but the president has pledged the dealers will "get their money."

Some dealers are worried they won't get their money, but Secretary of Transportation Ray Lahood has pledged that dealers will get paid for the incentives.

Through Thursday, auto dealers have made deals worth $1.9 billion and there are expectations the program will exhaust the $3 billion Congress approved for it.

President Obama said in an interview Thursday, the program has been "successful beyond anybody's imagination." It's no wonder. The way in which the program was hyped by the administration, it was like saying the streets are lined with gold. (more)

5 Downsides to 'Cash for Clunkers'

U.S.News and World Report has an interesting article on the unexpected - by Congress - consequences of the Cash for Clunkers program.

August 06, 2009 02:44 PM ET Rick Newman

Eureka! Stimulus works! The first $1 billion allocated to "cash for clunkers" rebates apparently helped boost car sales by more than 250,000 vehicles, bringing some much-needed cheer to depressed auto showrooms. So Congress added $2 billion to the program, which by extrapolation could increase sales by more than 750,000 units overall. Carmakers are gleeful. And the Obama administration finally has some concrete evidence that extravagant government spending occasionally moves the needle.

But the buying spree, fueled by government rebates of up to $4,500, may not be quite the economic boost it appears to be on the surface. And there will probably be some of those pesky unintended consequences. Here are a few reasons that cash for clunkers is likely to look a lot less successful when seen in the rearview mirror. (more)

Our brief national nightmare is nearly over

The Washington Post reports that Cash for Clunkers will end on Monday.

Tomorrow, Jay Flanders looks at the harmful economic consequences of this awful waste of $3 billion.

Trucks win in Cash for Clunkers game

The U.S. Department of Transportation issued a list for the 10 most common vehicles purchased under the Cash for Clunkers program. However Edmunds, a company that specializes in tracking automobile sales data, has a much different list. The government has mostly small, fuel efficient cars plus two crossover vehicles on their list. Edmunds has two full sized pick-up trucks, a mid-sized SUV, and a crossover among their top 10.

By Peter Valdes-Dapena, CNNMoney.com senior writer

NEW YORK (CNNMoney.com) -- What are people trading their clunkers in for? It depends on who you ask.

The government's results showed small cars as the top choice for shoppers looking for Cash for Clunker deals. But an independent analysis by Edmunds.com disputed those results, and showed that two full-size trucks and a small crossover SUV were actually among the top-ten buys.

The discrepancy is a result of the methods used. Edmunds.com uses traditional sales measurements, tallying sales by make and model. The government uses a more arcane measurement method that subdivides models according to engine and transmission types, counting them as separate models. (more)

Here's the DOT list: And here's the Edmunds list:
1. Ford Focus 1. Ford Escape
2. Toyota Corolla 2. Ford Focus
3. Honda Civic 3. Jeep Patriot
4. Toyota Prius 4. Dodge Caliber
5. Toyota Camry 5. Ford F-150
6. Ford Escape 6. Honda Civic
7. Hyundai Elantra 7. Chevy Silverado
8. Dodge Caliber 8. Chevy Cobalt
9. Honda Fit 9. Toyota Corolla
10. Chevy Cobalt 10. Ford Fusion

SPIN METER: $3 billion buys not-so-green vehicles

USA Today has an interesting follow up story on the Cash for Clunkers program. The Department of Transportation has been extolling the success of the program but for some reason won't share the data behind those claims so that they can be verified.

By BRETT J. BLACKLEDGE, Associated Press Writer

WASHINGTON – Transportation Secretary Ray LaHood, the nation's top car salesman in recent weeks, has cited the Obama administration's best-seller list of mostly smaller, fuel-saving cars like the Ford Focus to describe the success of the Cash for Clunkers rebate program.

But what LaHood and other administration officials usually don't mention is that some trucks and sport-utility vehicles that get less than 20 miles per gallon, like the Ford F-150 truck and one version of the Cadillac SRX Crossover, also are being purchased with the new government subsidies. Both are bulky vehicles weighing more than 6,000 pounds when loaded that boast at least 248 horsepower.

Just how many consumers used the federal rebates to buy these larger, not-so-green vehicles is unclear. (more)

Clunkers program could drive used car prices up

Call it basic economics - the law of supply and demand. Or call it politics 101 - the law of unintended, but glaringly obvious, consequences. Either way, the implementation problems and adverse effects of the relatively small Cash for Clunkers program might raise some doubts about the wisdom of having Congress involved in something a complex as Health Care Reform.

By Chris Woodyard, USA TODAY

Hundreds of thousands of "clunkers" headed for scrappers may cause already rising prices for used cars to head even higher, dealers and market analysts warn.

The popular cash-for-clunkers program, extended by Congress last week with $2 billion more in federal incentives, requires that all the old fuel guzzlers traded in are scrapped — not resold. That means up to 750,000 vehicles will never find their way into the hands of another owner. Many are at the end of their useful lives, but others, with years of life left in them, normally would be resold.

"Those are the cars that lower-income families need," says Geoff Smartt, owner of Smartt Cars in Caldwell, Idaho. (more)

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Save the Mustangs!

Drew Cline weighs in against the rampant destruction of wealth known as the Cash for Clunkers program.

Those vehicles are all nearing the end of their useful lives. Many, if not most, of them would be sold, traded or scrapped within a few years anyway. So really the taxpayers are not paying to get these vehicles off the roads. They would find their way to the junk yard soon anyway. The taxpayers are paying to get these vehicles off the roads now.

In so doing, we are eliminating their remaining economic value, which prevents that value from being put to use by those who could really benefit from it. If we wanted to pay people to trade up to newer, more fuel-efficient vehicles, wouldn’t it do more good to take the “clunkers” and redistribute them to people in need? Millions of Americans are out of work. Millions have had their vehicles, even their homes, repossessed. Wouldn’t it be more beneficial to give them these cars than to destroy them, thus lowering the supply and therefore raising the price of used vehicles?

He makes an excellent argument. The true cost of the Cash for Clunkers debacle isn't just the $3 billion in federal subsidies to buy your neighbor a new car. It's also the destruction of hundreds of thousands of functional cars.

According to Lojack, 1.1 million cars are stolen every year in the U.S. Congress will pay to destroy three-quarters of that total in just a few short months. So not only is Congress harming the economy more than all the car thieves in America; it's taking $3 billion from us to do it.

Plus, anything that results in the unnecessary destruction of a perfectly good red and white Ford Mustang convertible with leather seats has to be a bad idea.

Telegraph likes Clunkers Program

The Nashua Telegraph has words of praise for the Cash for Clunkers program:

Yet, in this program we can point to stimulus that is actually working. We have serious questions about whether Obama's recovery program is having such an effect, unless you count paving roads as stimulus.

But through cash for clunkers, dealers report a jump in sales directly tied to the program, not just “end-of-model-year” deals. It has brought people by the scores to showrooms and created a buzz that has given hope to a beleaguered industry desperate for good news. (more)

The Telegraph also points out the waste in forcing hundreds of thousands of working cars to the scrapheap. But the editorial looks at only the benefit of flooding the automotive market with our tax dollars, and not the costs, both to our debt and to the overall automotive market.

Why not 'cash-for-refrigerators?'

Sen. McCain may shy away from free market solutions now and again, but it's absolutely bang-on in his criticism of the Cash for Clunkers debacle:

"I just don't think it's a proper use of the taxpayers' dollars," McCain told The HIll. "The argument can be made, 'Why don't we have cash-for-refrigerators?' Or cash-for-anything? It's just a very, very bad use of tax dollars."

McCain acknowledged the program has brought an uptick in car sales, but said the effects will actually be negative in the long run.

"The results will be temporary, and when the money runs we're going to see the distortions that it's created in the market," he said. (more)

Meanwhile, Seacoast Online columnist Lynda Bettcher recounts her amusing experiment with Cash for Clunkers. Well, it's amusing if you're not Lynda Bettcher.

Cash for Clunkers: Inefficient pursuit of efficiency

The Union Leader has faint praise for the Cash for Clunkers program: it's less ineffecient than the rest of the Obama Administration's efforts to throw money out the window.

Destroying a quarter of a million working automobiles means prices for used cars, used engines and spare parts probably will rise, which hurts those who cannot afford a new car.

And where does the money for this program come from? Oh, yeah. Washington borrowed it. To subsidize new car purchases mostly for people who would have bought one anyway, we are going to pay interest on at least $1 billion, possibly $3 billion -- for decades. (more)