Did Cash for Clunkers Fail?

More

Cash for Clunkers, the government's auto-revitalization plan, raced through $3 billion of stimulus money in a matter of weeks. As far as Keynesian economics go, it was a perfect stimulus -- it was targeted at a flailing industry, timely since it was mid-recession and temporary because the money's gone.

But was it the perfect stimulus for our economy?


When C4C was alive and kicking, I wrote a series of posts questioning the logic behind the plan. You can read my rants here, here, and here. Sparknoted, my point was: The car market is ready to explode anyway, so why throw $3 billion at Americans to move thousands of eventual car purchases from Q3 and Q4 into three weeks in August?

Lately, I've thought about eating my words. August retail was gangbusters -- the biggest month in three years -- and the hero was clearly Cash for Clunkers. I began to wonder, could three billion dollars sloshing around the economy during a recovery be such a bad thing after all?

But now Andrew Sullivan points me to some evidence that the program wasn't a stimulus superstar after all. Jonathan Adler writes:

A new paper in The Economists' Voice concludes that the costs of the "cash for clunkers" program exceed the benefits by approximately $2000 per vehicle. Meanwhile, September auto sales are plummeting, leading to estimates the monthly total will be the lowest in nearly three decades.

Some perspective: As with the rest of the stimulus, it's just too early to say what failed and what succeeded. Maybe cash for clunkers has succeeded in ways that go beyond the C4C stimulus stats. Maybe it boosted morale among auto makers or got Americans in the spending mood. I'm seeing a lot of ads on TV where car companies (and electronic stores) are offering their own Cash for Clunkers deals. Maybe those deals, clearly inspired by the success of the government program, will keep inventory flying.

Or maybe I was right (stopped clocks, etc) and car sales will plummet for the next six months because we squeezed this year's car demand dry like a wrestler twisting a wet towel.  Time will tell, but this month's car sales are looking dismal indeed.

Jump to comments
Presented by

Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

Get Today's Top Stories in Your Inbox (preview)

Why Are Americans So Bad at Saving Money?

The US is particularly miserable at putting aside money for the future. Should we blame our paychecks or our psychology?


Elsewhere on the web

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus

Video

The Death of Film

You'll never hear the whirring sound of a projector again.

Video

How to Hunt With Poison Darts

A Borneo hunter explains one of his tribe's oldest customs: the art of the blowpipe

Video

A Delightful, Pixar-Inspired Cartoon

An action figure and his reluctant sidekick trek across a kitchen in search of treasure.

Video

I Am an Undocumented Immigrant

"I look like a typical young American."

Video

Why Did I Study Physics?

Using hand-drawn cartoons to explain an academic passion

Writers

Up
Down

More in Business

Just In