Cash for Clunkers moved a bunch of auto sales forward, causing people who thought they might replace their car in the next year or two to rush into the showrooms. Now, in the aftermath, sales are plummeting: 47% at GM, 44% at Chrysler, 8.9% at Ford, 16% at Toyota, 23% at Honda, 11% at Nissan. I hope those car companies used the cash infusion now, because they'll be on lean rations for months, even years.
The huge slide for our bankrupt giants is interesting. I mean, we expect sales to fall; the companies are hosed. But why was Cash for Clunkers particularly good for GM and Chrysler? Or did they simply use up more inventory than their competitors, since they're shutting down production lines?
Copyright © 2010 by The Atlantic Monthly Group. All rights reserved.
You missed the important part:
Hyundai Motor Co., South Korea’s largest automaker, bucked the industry slide with a 27 percent increase. Seoul-based Hyundai said it sold 31,511 vehicles last month, up from 24,765 a year earlier.
Hyundai is offering some of the most compelling cars on the market today and they are doing well. Chrysler and GM are still hobbled by uninspired, under-engineered, under-developed, unreliable s*it boxes.
Just goes to show, war never accomplishes anything good. If we had let the Norks have Seoul, they could all be singing to Dear Leader and we'd have 31,511 more car sales last month.
Hyundai was also the first car company to offer to take back your car if you lose your job. It's a pretty innovative idea, and I wonder how many people bought them because of it.
Also don't forget Hyundai offers a ten year warranty, where most manufacturers offer only three or five years.
And just to make it clear to people, those are declines year-on-year (not from the C4C-fueled months), and August 08 wasn't exactly that good either.
Err, I mean September 08 wasn't exactly good, either. Even worse, perhaps.
Sept 08 sales for GM were 15.8% lower than Sept. 07
http://media.gm.com/servlet/GatewayServlet?target=http://image.emerald.gm.com/gmnews/viewmonthlyreleasedetail.do?domain=74&docid=49175
Chrysler Sept 08 sales were 33% lower than Sept. 07
http://www2.prnewswire.com/cgi-bin/stories.pl?ACCT=109&STORY=/www/story/10-01-2008/0004896222&EDATE=
So GM sales would be down 53.7% in Sept 08 compared to Sept 07
Chrysler would be down 61.2% in Sept 08 compared to Sept 07
Ouch.
Just heard that the Penske deal fell through, too. No more Saturn.
This is very sad to watch.
I made typos - should have been Sept 09, not 08, in the last 2 sentences/
Before the US Taxpayer was forced to give GM unions $15 billion, GM was losing $1 billion per month.
That $15 billion bought GM one year.
There is no way GM was suddenly going to make up a billion dollar deficit in sales every month. Can you even conceive how many cars would need to be sold each month to make a billion dollar profit? And that would only get GM out of the red. Still wouldn't be profitable; their stock would continue to fall.
Cash For Clunkers was a poorly administered last ditch (not to mention unfair) boondoggle to stimulate sales at dying government-run car companies using taxpayer dollars the government does not have.
It didn't work.
Would you buy a car from mmm...mmm...mmm Barack Hussein Obama?
Let me be clear: you must buy this car.
There are those who say this car is poorly built and costs too much. That's the old politics of division. Americans need to come together and usher in a new no-money-down era of hope -- hope that your warranty won't be voided by bankruptcy, hope that you're willing to fund generous pensions for the UAW. It's time for you make the sacrifice and fulfill America's broken promises by paying full sticker prices. Because this sucker is golden! I'm not just giving it away.
I've said it before and I'll say it again. President Obama's naturally tendency seems to micromanage. He's not even willing to let the city of Chicago campaign for itself.
But that's just an aside... no disrespect to a community organizer/lawyer (and his aides), but they should not be playing business-person.
Anyone can tell you a last ditch sales promotion is not going to restore health to a company. Cutting prices to increase the long term profitability of your company, in a competitive environment, works approximately 0 times out of 100.
Not only did they rob sales from the future, but they devalued their own product in the process. This is what happens when we have people who have not had years of experience in the real business world.
I'd like to say I couldn't blame them... but slashing prices to make a fast nickel over a slow dime is something only a completely inexperienced business person would do.
It wasn't. Those are year-on-year declines.
Well, I think we will see another incentive program produced as soon as Cap&Trade and heathcare reform fail this month.
I hope so. Freshmen the world over need a good lesson in the law of diminishing returns.
Freshmen the world over need a good lesson in the law of diminishing returns.
Boy don't they. Here's the kind of economic education they're getting today:
"... The multiplier is the effect of government spending permutating through the economy: I buy a wrench for my fighter jet from you, you hire workers, they feel richer and start shopping big screen televisions, and so forth . . ." - Megan McArdle.
Of course, the de-multiplier effect of all that money that wasn't spent by its original owners (taxpayers) - before it was taken from them by force - is never counted against the multiplier effect of it getting spent by the government.
Freshmen indeed.
Right, but it's kind of silly to quote Megan when she's merely defining it before being extremely skeptical of its size.
Uhm, the notion is that during recessionary periods, the government can choose to spend at times when the public would choose to horde (low consumer confidence), or it may temporarily spend borrowed income now that will be partially inflated away and partially paid by the public later during better times. You can criticize the foundation of the concept if you so wish, but you're not even close to making a compelling argument against Megan's knowledge of the topic.
Except the advantage of being a government is that you can print money, and can therefore spend *without* taking the money from taxpayers. Which is inflationary, but in this case that was sort of the point: pump dollars into the economy in order to avoid a deflationary collapse.
Re: Katherine and printing money: I'm emphatically not an economist, but I do get that printing more money without a corresponding increase in production (of some sort) is inflationary. So how does it work, or how is it supposed to work, that printing more money will "prevent a deflationary collapse," given that it appears (to me) that printing more money without that corresponding increase in production isn't a whole lot different from declaring that half a dollar bill is now legal tender? (Everybody just cut your folding money in half - more money in circulation, keeping the economy... um... inflated, and the added bonus of no printing costs!)(And obviously I'm using "half a dollar bill" as an analogy; I don't think we're going to see 100% inflation.)
Truly, I want someone who does understand how this concept is supposed to work to explain it. I get caught up in the "But wait, how does just printing more money do anything for the amount of value floating around?" thing. Is it a psychological effect? A confidence effect? How is it supposed to work?
"... why was Cash for Clunkers particularly good for GM and Chrysler?"
Good?
If so why is GM today blaming Cash for Clunkers for their bad sales numbers? GM and Chrysler sales are down 45% year over year and taxpayers are out $3 billion, but take note who is not down 45% year-over-year: Ford.
Hyundai sales are up 27%.
"GM blamed the decline on the clunkers program pulling buyers into July and August, weak consumer confidence and low inventory levels during September before production increases could replenish stocks.
Cite:
http://www.msnbc.msn.com/id/33122449/ns/business-autos/
For myself, I wonder how long any car company can stay in business when unemployment under Barack Obama is actually rising. Gotta have a J.O.B. if you want to stay with me:
"The hole that has been blown in the labor market is absolutely enormous,” said Heidi Shierholz, an economist with the Economic Policy Institute.
On Thursday, the Labor Department said initial claims for unemployment insurance rose to a seasonally adjusted 551,000 — up from 534,000 in the previous week and more than Wall Street economists expected.
Cite:
http://www.msnbc.msn.com/id/33122485/ns/business-eye_on_the_economy/
If you want to see something downright nasty for GM, look at sales of full size pickups: Down 61% for Silverado and Sierra. That's a BIG deal since those 2, especially Silverado, are major profit makers.
Another interesting fact form Sept results is those of small cars. We have been told thatsmall, fuel efficient, cars are the next big thing, especially with younger buyers. Toyota Yaris sales were down 68% - . Honda fit was down 51%. Versa was down 23%. Only Hyundai accent was up and still only a little bit. None of these have ever sold anywhere near the totals for compacts or midsize cars. It seems, at least for now, that Americans do not want these small cars.
Yeah, gas is way down. Americans do not want cars that small without higher gas prices.
For that matter, Europeans and Japanese don't want cars that small except for their gas taxes, too.
Is it the case that these small cars, e.g the Yaris, Fit, Versa, etc. were disproportionately popular with C4C participants, and might therefore see a larger drop immediately after C4C ended?
No. Those cars were not the big winners. The biggies, in cars, were compacts and midsize - really the same cars that always sell pretty well. If you look at the actual numbers for the little cars, you see that they don't sell that many at all.
Meanwhile, Ford F-150 sales are up 4% (pdf).
Cash for clunkers was a disaster for both Chrysler and GM. Very possible a stake in the heart.
Did people buy more GM and Chrysler product than they did last year?
Yes. But for every GM purchased there were many, MANY competitors purchased.
Doesn't anyone pay attention at what is actually killing GM? It's not price. You can't get a car much cheaper than a US sub-compact, particularly when you factor the inevitable rebates and give-backs. It's not styling. Until their recent 2 door coupes, you would have sworn that the Honda designers were meth addicts. Their cars are hideous.
Then what is it? You all know: reliability and build quality.
The WORST thing that happens to GM is when one of their loyal buy another car. They never, ever EVER come back. After they realize that they aren't bringing the car back to have a leaking headlight lens replaced, or a piece of stripping glued back on, or a power seat button replaced - or a major power train issue resolved - a couple of times a year, they get spoiled.
And at two years they say "you mean I don't have to trade it in yet?"
And that's that.
If you want to replace GM with Chrysler here, multiply all of the bad things by 2.5...
Cash for clunkers drove millions of buyers into the arms of cars that they would have never bought before. Hyundai, in particular, but even Kia and Ford. Those people ain't coming back. Ever.
What a debacle.
And don't underestimate the political backlash effecting sales. Many of my friends who previously owned GM product have vowed never again to purchase vehicles from the company owing to the tactics employed by union thugs during the August recess.
Killing GM by refusing to buy their thug-built product is now seen as the patriotic thing to do.
I feel that myself, but I'm a libertarian and don't view myself as "median." With that said: several of my "median" friends have said the very same thing. This is obviously a key reason why Ford is rebounding.
Autoextremist refers to Ford as "The Original American Car Company."
I doubt very many people have a strong viewpoint on GM union-thugs. Mot consumers aren't news junkies.
On the other hand, I wouldn't be surprised at all if most people have some idea that GM is on the government teat and are turned off by it.
Mickey Kaus:
"GM's sales are down 45% from last September (when sales were already bad enough to drive the company into banrkuptcy). Chrysler is down 42%. Ford is only down 5%. Car buyers are clearly punishing the two bailout recipients brutally."
http://www.slate.com/blogs/blogs/kausfiles/default.aspx
I feel this way as a libertarian fellow, but I think this may also blow the old feeling among conservatives that they should Buy American. Righties should freak over buying GM products - it's almost like sending a check to the unions (and by extension the Democrats).
My dad - who had never owned a car not made by Chrysler or AMC (which was purchased by Chrysler in '88) - said if he ever needs to buy another new car, he's buying a Ford.
The reason - besides that both my brother and I own Fords and are happy with them - is that his favorite dealership, a small family-owned Chrysler dealer that was opened in 1923 - was one of the ones that Chrysler pulled the franchise from. The same dealership that once loaned him a car for two months, free of charge, while he waited for the Plymouth Voyager that he custom ordered to have almost no options to be built and delivered.
Eh -- I think you're seriously overestimating the unreliability of GM and Chrysler cars. Mostly they're just average in reliability, but relatively cheap to fix and cheap to buy (especially used). I'd feel safer buying a new GM or Chrysler than a new VW (which tend to be unreliable and expensive to buy and expensive to fix--a trifecta). But, of course, I haven't bought any new GMs, Chryslers or VWs for a long time -- our last 2 new cars have been Japanese. Although we have had a couple of old Chrylser/GM vehicles as teenage junkers, and they've actually been pretty reliable and cheap to keep running.
I agree about reliability. I've owned Toyotas and Mercedeses and Nissans, and the '98 Buick LeSabre I've been driving for 6 years is as well-built and reliable a car as I've ever had. Chevy and GM trucks are about as good as any. Most of that "quality" thing is perception.
This is political backlash (pickup truck drivers skew heavily to the Rush Limbaugh end of the spectrum) and serious doubt (despite the President's promises) that you're going to be able to get warranty coverage after the 2010 elections. Even if I didn't mind about my forced contribution to the UAW, why would I buy a Ram or a Silverado over an F-150? Ford's got a much better chance of being around in a year or two.
So wait, you're telling me that the government putting it's thumb on the scale isn't a good idea? There's something rolling around in my head about the good news in the housing market, an $8k credit, and the fact that it expires in November, but I can't quite figure it out.
You're probably tired, but it could be worse. Imagine if you had to sacrifice and fly your own personal 727 to Copenhagen to dine with the Queen and Oprah Winfrey.
So suck it up. There are people out there making REAL sacrifices, while you complain about your memory slipping a bit...
;)
Imagine if you had to sacrifice and fly your own personal 727 to Copenhagen to dine with the Queen and Oprah Winfrey.
But Rob, what about the kids? The KIDS?
"In her speech in Copenhagen today, First Lady Michelle Obama said her trip to Denmark, along with the travel of her “dear friend” and “chit-chat buddy” Oprah Winfrey, as well as tomorrow’s visit by President Obama, is a “sacrifice” on behalf of the children of Chicago and the United States. “As much of a sacrifice as people say this is for me or Oprah or the president to come for these few days,"
It's for Teh Children, Rob.
Sacrifice.
Mea Culpa. What was I thinking?
Out: Marie Antoinette
In: Michelle Obama
To be fair, having to put up with Oprah really is a genuine sacrifice.
I think you mean putting up with "rape-rape" Whoopi....
In the Not At All Anecdotal Leading Indicator deparment, the number of Ford Flexes I've seen on the road has risen in the wake of CfC from single digits in the months before then to losing count at over 20.
Ford sold over 2000 flexes in September. That's actually pretty good for an expensive car.
Not to mention a funny-looking one.
I rather like the way they look; nice lines exaggerate the length. But they are pricey.
And a lot smaller than they look. Length, yes, but width more so. They're not particularly wide.
You can put a 4' wide sheet of whatever building material you'd like into a Pilot. I've used that feature countless times...
I'm hoping that the new Explorer is large enough to compete, well built enough to warrant attention, frugal enough to keep that attention (all of the Asian SUV's in this class get Highway MPG's well into the 20's now, with HP well over 200), and better looking that the comparable Hyundai, Honda, and Toyota's.
That last one should be easy. The Asians really do beat their larger SUVs with the Ugly Stick, don't they?
Makes you look, doesn't it?
What's the point of spending all that money on a flex if you can't show off that you did?
"All that money"? I got mine for just under $22k.
GM and Chrysler alienated their customer base by taking the bailout money. I bet if you polled support for the auto bailouts and compared it to vehicle ownership, foreign car buyers were more supportive of the bailout than American car buyers. But a Volvo driver who supports the bailout won't buy a Chevy, while a Dodge driver would consider switching to Ford for their next purchase.
I may be out of date, but doesn't Ford own Volvo, or have a large stake in it?
Ford have sold off most of their European automotive holdings. They do still have the Volvo passenger auto line but have been shopping around for a buyer over the past year.
Statistics like these are why I, along with all right-thinking people, am firmly in favor of a mandate requiring each and every American to buy a new American car every year. For those who cannot afford a new car every year, the government should step in and subsidize the purchase.
These companies are the back-bone of America and, what's more, they are now largely owned by the government -- which is to say by all of us taxpayers. Just think of the amazing returns we would get on our investment if 300 million new American cars were being sold every year.
This is just straightforward, common sense economics. As a nation, we can't afford not to put this plan in place.
Of course, it would need a catchy name to make it through Congress. I suggest "Clunkers for Clods" since Americans' continued opposition to the enlightened progressive platform is showing them to be cloddish at best but would be open to other suggestions.
In fact, we should take Obama's health care reform plan one step further and mandate that every American purchase a Space Shuttle.
Think of the jobs Obama would create! The Fed could start a Space Shuttle Funding Facility - Maiden Lane IV: "The Voyage Home" - to provide much needed liquidity in the Space Shuttle market.
Of course, the poor who cannot afford to purchase a Space Shuttle could have their purchase subsidized by those making over $250,000,000 a year.
You do have an excellent idea there.
Perhaps we can do some blending?
Anyone who arrives in a non-American car gets into the "slow line" in the ER. If they're admitted they receive:
Yellow Jello, every day.
Extra crispy sheets.
A TV that only gets the shopping channels.
A Johnny 2 sizes too small, with worn out velcro, and
A flatulent room-mate, with an unknown diagnosis
"Statistics like these are why I, along with all right-thinking people, am firmly in favor of a mandate requiring each and every American to buy a new American car every year. For those who cannot afford a new car every year, the government should step in and subsidize the purchase."
It would be so much more efficient for the government to simply buy the cars directly, à la Heinlein's The Door into Summer.
Now correct me if I’m wrong but wasn’t “Cash for Clunkers” touted as an example of a successful government program?
Although if this boondoggle helps to convince the American public and Congress that maybe, just maybe a federal takeover of health care isn’t a good idea, than it might be money well spent.
"... wasn’t “Cash for Clunkers” touted as an example of a successful government program?"
It worked so well, they're starting another one: Cash For Dishwashers
http://abcnews.go.com/Technology/JustOneThing/story?id=8374739
These are thinly disguised mob payoffs to the union thugs providing "security" at Town Hall events. The mafia is running your government.
Come on, it was a great success. Did you see how much money they shoveled out the door?
Last I heard, they didn't even do a very good job of that. What is the world coming to when the government has trouble giving money away?
If they failed, it was only because they set their standards too high. If the amount that was spent on C4C was spent by anyone other than the US Congress, it'd be quite an impressive sum(to say the least).
Cash for Clunkers moved a bunch of auto sales forward, causing people who thought they might replace their car in the next year or two to rush into the showrooms.
Cash for Clunkers wasn't a bad idea unless you're opposed to any and all recession amelioration efforts by the government on principle. An economy that's once again growing, by, say, 3% a year is presumably in a better position to weather slumping car sales than one that's mired in a deep recession -- especially given the fact that much of said industry is situated in an economically weak part of the country.
I think the problem with Cash for Clunkers -- and I'd add the house purchase tax credit as well -- is the way it's structured. They'd be better off stretching these programs out in duration by gradually phasing out the credits out: you know, reduce it to down to $3,000 for 90 days, and then $2,500 for the next 90 days, and so on. Wean the drug addict gradually rather than make him go cold turkey, in other words.
I think all of these targeted stimulus programs should be structured as phase outs. The abrupt stop approach will inevitably be problematic.
Cash for Clunkers wasn't a bad idea unless you're opposed to any and all recession amelioration efforts by the government on principle.
Wrong. C4C actually destroyed usable cars. It's practically a textbook example of the broken windows fallacy.
TallDave: You're not correctly applying Bastiat's ideas here. Obviously we have to take into consideration the loss value of the destroyed economic assets. But that does not mean there's no net benefit to the economy. Rather obviously, an economy that upgrades, say, 1,000,000 of its less efficient vehicles to the same number of shiny, new, highly efficient vehicles will see a benefit. The effects of the broken windows fallacy would obviate the gains from the program only if we were destroying clunkers and replacing them with, um, clunkers. And this is before we even get into the multiplier effects of the spending itself.
Of course, there's also the benefits to the environment - I'm thinking especially of climate change -- which non-crazy people like you and me have to take into account.
"Obviously we have to take into consideration the loss value of the destroyed economic assets. But that does not mean there's no net benefit to the economy. Rather obviously, an economy that upgrades, say, 1,000,000 of its less efficient vehicles to the same number of shiny, new, highly efficient vehicles will see a benefit."
Only if the efficiency gains exceed the value of assets lost.
but the environmental effects of taking those clunkers off the road needs to be counterbalanced by the fact that it takes a bunch of resources to make a car - all the resources that go into it, plus all the energy involved in making and transporting it.
And then there is the fact that many of those clunkers probably would have been junked in the near future anyway - and that people might drive the new cars more because they are nicer and cheaper to operate.
Rather obviously, an economy that upgrades, say, 1,000,000 of its less efficient vehicles to the same number of shiny, new, highly efficient vehicles will see a benefit.
No, it obviously won't. If it was that simple, we would all buy new cars every year and throw away our old ones. Why don't we? Because the old car has value.
And this is before we even get into the multiplier effects of the spending itself.
There is a larger, negative multiplier from taking the money out of the economy to pay for this misallocation of resources.
Of course, there's also the benefits to the environment - I'm thinking especially of climate change -- which non-crazy people like you and me have to take into account.
No, we don't. Even if you accept this poorly-evidenced and highly dubious notion that CO2 levels are driving temperatures, the monetary benefit of the change to a new car is essentially zero because the tiny alleged benefits are 50-100 years away, (again, if you believe unreliable GCMs) most of the effects are already locked in -- and geoengineering in 2059 is probably a better solution than wasting money in 2009 anyway.
"The effects of the broken windows fallacy would obviate the gains from the program only if we were destroying clunkers and replacing them with, um, clunkers."
This is partly true. Some of the difference in value is outside the Broken Windows effect, some of it not. It's as if they painted a shiny new frame for each 2 windows broken.
"And this is before we even get into the multiplier effects of the spending itself."
You're not understanding the point of the broken windows fallacy. That and the candlemaker's petition are both direct criticisms of claims of the multiplier effect. What did you think Bastiat was writing about?
Jasper - What you're missing here is that you're not looking at the other side of the equation. What we don't see is all the things that would have been bought with the $3 mil that the government will have to collect in taxes to pay for this boondoggle. So what the government gives with one hand, it takes away with the other. The only good stimulus plan is one that reduces the tax burden and unnecessary regulation which frees up capital to grow the economy. For a more in depth explanation, see my full post on the Cash for Clunkers program at http://www.freedomminute.com/blog/federal-government/cash-for-clunkers-success-failure/
Of course I meant $3 billion. I only wish it was $3 million.
I'm not "missing" what you allege at all -- and fortunately neither are the sensible people formulating economic policy these days. What part of "massive intervention by governments and central banks enabled the global economy to narrowly miss a 1930s-style depression" don't you understand?
First of all, you assume that the government's intervention averted a depression, that's not a proven fact. We don't know what would have happened otherwise. Furthermore, the vast majority of the bailout money hasn't been spent yet, so it couldn't be the reason that a "depression" was averted. Of course, you could make the argument that simply by the government taking some action, that gave back some confidence to the market and a panic was avoided. There's some logic to this and is a reasonable argument to make for some government intervention in a crisis. However, I wasn't arguing for no government intervention at all under any circumstances, I was criticizing the c4c program specifically and I think that all the evidence points to me being correct.
Cash for Clunkers wasn't a bad idea unless you're opposed to any and all recession amelioration efforts by the government on principle.
No, it's perfectly reasonable to support spending that builds solid assets, like bridges, roads, docks, railways, etc., while thinking that destroying perfectly good cars while encouraging debt-happy consumers to buy new vehicles on credit is monumentally stupid. We would have got about as much benefit by incinerating the money and paying a couple of people to cart the ashes off. That would have at least created a job or two.
A car is a human right. We need to nationalize the car companies and then... oh right.
"Cash for Clunkers wasn't a bad idea unless you're opposed to any and all recession amelioration efforts by the government on principle. "
Kind of a broad statement, no?
If Obama, Pelosi, and Reid had men and women walking the high iron of our bridges right now, not only repairing but expanding them, I'd be for it. If 3 lanes were being added to each side of every highway in the I-95 corridor (and comparable spots, nation-wide), who would oppose it?
I could even get behind an initiative to expand the capacity of certain airports, to make access to major municipal areas easier.
As was said in another post, there *are* infrastructure dollars that are a good idea.
Instead we get cash for clunkers?
It is, and was, a dumb idea. It very well could be the straw that has killed Chrysler and GM - unless you believe that we should just pump cash into them in perpetuity.
Cash for Clunkers wasn't a bad idea unless
you think that paying relatively well-to-do people to destroy valuable, functional assets is a bad idea.
As part of Cash For Clunkers, millionaire former Senator Bill Frist bought a Prius.
So, what you have here is a millionaire receiving a $4,500 welfare check to purchase a brand new car.
This is what the Democrats tout as a great success.
Handing government welfare to millionaires.
So, what you have here is a millionaire receiving a $4,500 welfare check to purchase a brand new car.
Well, of course. An actual welfare mom can't afford a new car, so she wasn't eligible. And if she was driving a 1983 Crown Vic that she bought for $500 because that's all she could afford, her car wasn't eligible, either, because the rules of CfC dictated that cars which were too old weren't really "clunkers," and couldn't get the credit.
But no, it wasn't a bad idea at all.
And when she goes to replace that Crown Victoria with another used car, she'll have to pay more for it since there will be less used cars on the market due to the government mandate to destroy perfectly good vehicles.
You can argue against fiscal stimulus policy on principle, but if you are going to spend money on fiscal stimulus, the cash for clunkers deal sees like one of the most effective means of doing it. I noted this earlier this year, in response to the reported results of the German version of this. That sales are plummeting here now that the incentive has been withdrawn is not a knock against the effectiveness of the incentive in stimulating sales while it was in place.
The reason it looks good from multiplier perspective is that it requires a private match for the government spending. But the requirement that it destroy working cars (and the exclusion for really old cars) is utterly wasteful.
"The reason it looks good from multiplier perspective is that it requires a private match for the government spending."
That's true, and for the same reason I was arguing that the government should have included, as part of its stimulus package, a 50% tax credit for businesses to buy new equipment, and set that credit to expire at the end of this year.
"But the requirement that it destroy working cars (and the exclusion for really old cars) is utterly wasteful."
I agree that it shouldn't have excluded really old cars. In fact, one of the earliest columns in favor of cash for clunkers -- if memory serves, this was published in the summer of '08 -- argued explicitly for including the oldest cars, on both environmental grounds (these tend to be the dirtiest) and on redistributive grounds (the people who own them tend to be the poorest).
"That sales are plummeting here now that the incentive has been withdrawn is not a knock against the effectiveness of the incentive in stimulating sales while it was in place."
What good is two months' worth of stimulus? The administration has made it clear since before taking office that this recovery would be long and difficult. Why waste time with programs that last one or two months? Especially when they produce an immediate hangover?
If people are truly not buying GM or Chrysler cars because of the bailout, then they are idiots. Talk about cutting off your nose to spite your face.
It's funny to see people invoking the broken windows fallacy. The broken windows fallacy is only a fallacy when the economy is running at or near full capacity. If it is severely recessed, then in fact destroying property with the intent of building it back can increase wealth through multiplier stimulative effects. Some people don't believe that multipliers are above one, which is fine. But that is a logically prior issue, one that the broken windows story doesn't address. In other words, in a recession, the broken windows fallacy is actually definitively not a fallacy or it is completely indeterminate.
In other words, criticizing CfC because it destroyed useful cars is not a cogent criticism. It's possible that the program could have been better designed to achieve the same stimulus without destroying usable property. On the other hand, part of the goal of the program was environmental as well.
The broken windows fallacy is only a fallacy when the economy is running at or near full capacity.
Oh dear God.
Come here, I want to beat you with an econ textbook.
Pot. Kettle. Black.
Like it or not, there are animal spirits in the economy and no respectable libertarian economist argues otherwise (the Austrians are the only exception and they are wrong). There are "animal spirits" like loss aversion which can lead to sticky prices and an inability for the invisible hand to simply correct through price changes.
I don't think that justifies Krugman-esque stimulus bills. But please argue from reality and not the libertarian echo chamber.
Destroying wealth is rarely a good idea.
So here we have a program that destroyed working vehicles, raised prices of used vehicles, increased government indebtedness to foreign bond holders/decreased the value of US currency due to printing of money, and successfully increased the sales of foreign auto manufacturers.
Yes. Let's all just jump up in a lather of optimism, and everything will be ok.
Houses will start doubling in value every 3-4 years, no doc, no downpayment mortages will be available to anyone, securitized debt paper will be readily bought up by pension funds everywhere.
La-di-dah!
Derek
On the other hand, part of the goal of the program was environmental as well.
The economic value of chasing mythical CO2 fairies is zero. Even if the fairies were real, which they aren't, the value would still be practically zero because problems in the far future are heavily discounted.
If people truly think that GM or Chrysler can survive, or that they weren't both on course for bankruptcy 5 years ago, selling off and mortgaging all their assets in an attempt to raise enough cash to keep up with their burn, they're idiots. The recession just moved up the collapses by one year, tops.
Keeping them afloat is just ignoring sunk costs. It's throwing good money after bad.
Even if you believe in the multiplier effect, why destroy the old property? The broken windows fallacy remains a fallacy because you're still needlessly destroying things.
Manufacturing a car takes energy, and hurts the environment too. And if all it did were pull forward sales by a couple months (and cause some people to delay buying a car until it started), that's a really expensive price to pay for only a couple of months of a slightly more efficient cars. (Or even fewer months, for people who delayed purchases.) And keeping really poor people in even older cars (that were exempt from C4C) because they'll be fewer 1990s and such cars on the market is terrible for the environment from the standpoint of traditional pollutants like NOX and SOX and chloroform.
Because environmentally it makes so much sense to stimulate new production and trash usable cars. Burning your old books so you can buy new ones printed on recycled paper is not environmentally conscious. Shoot, recycling your old books so you can buy new ones printed on recycled paper isn't environmentally concscious. Cash for Clunkers is the environmentalism of fools.
Muzzy Belly
Destroying viable assets is destroying wealth and is the "broken windows" theory incarnate. Digging holes to fill them in does NOT create wealth
Oy vey. Where to begin?
1. So what happens when a company mothballs an existing production facility in order to build a better, more efficient production facility? Have you ever heard of creative destruction. What is that, exactly, except destroying viable assets to create wealth?
2. Of course digging holes to fill them in does not, in itself, create wealth. That is because the marginal value of the labor product is zero. However, digging holes to, say, fill them in with buildings does create wealth. Breaking a winder to replace it with a better window does create wealth.
3. Even digging holes to fill them back in again can create wealth if there is a stimulus modifier above one. Just follow the money trail. Assume that there is money being held and not deployed productively, and there is idle labor that is not being deployed productively. Both are definitionally true in recessions. If so, the economic cost (i.e. opportunity cost) of paying money to labor to dig holes is zero. If that money is then spent on increasing demand for goods and thus demand for labor, then wealth is created where there was no wealth before.
So what happens when a company mothballs an existing production facility in order to build a better, more efficient production facility? Have you ever heard of creative destruction. What is that, exactly, except destroying viable assets to create wealth?
The mothballed facility, having lost its economic value, is no longer a valuable asset. If it's got economic value you DON'T destroy it, you sell it to somebody else.
Breaking a winder to replace it with a better window does create wealth.
Only if the value of the better window EXCEEDS the value of the old window PLUS the new amount spent on it. And if the window could have been sold to someone else, you've got to subtract the money you could have got from reselling it if you destroy it.
Even digging holes to fill them back in again can create wealth if there is a stimulus modifier above one. Just follow the money trail. Assume that there is money being held and not deployed productively, and there is idle labor that is not being deployed productively. Both are definitionally true in recessions. If so, the economic cost (i.e. opportunity cost) of paying money to labor to dig holes is zero.
We are BORROWING money to destroy the cars. This is money that has to be paid back, so it's money that in the future can't be spent on something actually valuable. It's not a question of deploying wealth that's sitting static in banks -- it's borrowing money to destroy an asset and replace it. Borrowing money to build a new asset might be worthwhile, but this is plain dumb. And even if we assume that we're redeploying existing capital, it would be much better to deploy it on something that has real economic value (a school building, maybe?) instead of replacing a perfectly good car with a slightly better one. Money that you spend on filling holes can't be used to build the buildings that go in the holes.
You can't turn labor that has no economic value into wealth by borrowing the money to pay for it. Unless, of course, you plan to renege on the debt or inflate the currency to the point where the debt vanishes, which may of course be the plan here.
1. Facilities are often mothballed when they have economic value. They aren't sold because the value to an outsider may be smaller than the value to the original owners, and less than the transaction cost.
To take just example among thousands, think about facilites integrated into a specific production process or logistical network. If a chemical company has facility A that produces some intermediate ingredient (like ammonia or HCL) and then pumps the ammonia through a pipeline to facility B to make end-user products (such as PVCs), then facility A only has value if it is connected to facility B. If the company decides to break that link by connecting B's input to new facility C, then A has no value and can't be sold. It did have value, however, when it was decided that C would be constructed.
2. Borrowing money is no different than money that is already owned. The opportunity costs are the same. Basic economic analysis.
The point is that economic stimulus has value in and of itself. We have to pay back the money we borrowed. But meanwhile we have better cars and, if the stimulus was useful, then also more economic capacity with which to pay.
Only if the value of the better window EXCEEDS the value of the old window PLUS the new amount spent on it. And if the window could have been sold to someone else, you've got to subtract the money you could have got from reselling it if you destroy it.
Perhaps you meant that the new window needs to be more efficient? Breaking windows and replacing them with more expensive windows does not in and of itself create wealth. If it did, we could just go around breaking windows and replacing them with more expensive ones and we'd all be richer. However, if you replace an inefficient window with a more efficient window that will save, for instance, some heating and cooling costs, then it becomes an investment. Whether or not that investment makes sense depends on whether the overall savings over time, adjusted for the future value of money, is more than the value of the the old window plus the cost of the new window, plus any cost to finance the new window or loss of investment income from the money spent on the new window, plus the amount you could have sold the old window for, if applicable. In addition, there's an opportunity cost to breaking and replacing the window since there might be a more efficient use of the money that would increase your wealth more than replacing the original window.
(For simplicity, I'm assuming that the new and old window would get replaced at the same point in the future, but you could, of course, expand the calculation to account for the difference in lifespan if you wish.)
destroying property with the intent of building it back can increase wealth
This makes no sense. Wealth is property (not money). Destroying property destroys wealth. If you want to spend stimulus dollars to create wealth, then spend it building stuff people want, and you can get your multiplier without the offset of the destroyed property working against it.
This makes no sense.
95% of the commenters here make no sense.
No one expects leftists to understand markets.
See my above comments to GLEX flyer. I am not a lefist, but I am sure you are including me in that category.
My experience with libertarians is that they frequently like to lecture other people based on their knowledge of economics, which rarely extends beyond what they learned in freshman economics. Then, when presented with arguments based on far more sophisticated scenarios -- such as business cycle theory, game theory or advanced price theory -- they accuse others of being ignorant or not understanding the way "markets" really work.
I do not know if that is true in this case, but certainly many of the comments on this message board are consistent with that underlying story.
To DaveinHackensack and all the others that think this type of government stimulus scheme is a good idea, you couldn't be more mistaken. As I explained in my blog post on this very subject back in August, the $3 billion to pay for this program has to come from somewhere. That somewhere is tax dollars. And as anyone who understands basic economics will tell you, every dollar that is taken away from consumers in taxes, is one dollar less that is available to be spent or invested in other areas of the economy. That’s a dollar less to be spend on clothes, or food, or entertainment, or any of the countless other things that individuals might choose to spend their money on and grow our economy. But, of course, we’re not talking about one dollar, we’re talking about three billion dollars. Now if you’re tempted to think that this was an even trade-off, you’d be wrong. The reason is that there is a cost to collecting those tax dollars and administering the programs. Furthermore, we don’t currently have these tax dollars, we have to borrow them and pay interest on them. Think about the interest on $3 billion. But that’s not the worst of it. The worst part is that the government decided how best to spend this $3 billion. That might not have been the most efficient use of that money. In fact, it’s almost a guarantee that it wasn’t. No government bureaucrat, no matter how smart or well intentioned, can do a better job of deciding how to spend that money than the individuals from whom the money was taken from. Those thousands or tens of thousands of individual purchasing decisions would have, in the long run, produced a better economic outcome and we would all have been better off. Simply put, if those billions of dollars were best spent on buying cars, then that’s how individuals, making their own personal choices, would have spent them. Of course there's a bunch of other reasons why this program was a bad idea. For the full explanation, see my post here.
That somewhere can also be borrowing. You can argue that that debt ultimately has to be paid with tax dollars, and that this will represent an increase in the burden on the economy in the future, but then you are essentially arguing against any sort of counter cyclical fiscal policy response to deep recessions.
You don't have to break windows to stimulate the economy counter-cyclically. You don't even have to spend money. You could temporarily cut taxes instead.
I can't decide whether this strange worldview in which the only possible way to stimulate the economy is by breaking windows is more sad or disturbing.
How would that stimulate the economy? The money would be saved rather then spent so it wouldn't do anything to moderate the collapse in aggregate demand.
jmo,
That only happened with the Bush tax cuts because they gave the bulk to the wealthy who don't spend. A temporary payroll tax cut would give money immediately back into the hands of every working person in America, people who would spend it because their household income has plummeted. And since the tax is only levied against the first $80-100,000 of income, the wealthy wouldn't benefit any more than the rest of us.
jmo,
That depends on how taxes are cut.
Also, aggregate demand is not the only limiting factor right now. Tight credit is also creating problems. Savings can be lent at 10x.
"You don't have to break windows to stimulate the economy counter-cyclically."
That's true.
"You could temporarily cut taxes instead."
Tax cuts have less impact when people and firms have lower tax liabilities due to a severe recession (although a temporary payroll tax holiday would have been a good idea). Temporary tax credits -- like the one I mentioned earlier, a 50% tax credit for businesses that buy new equipment by the end of the year -- would have probably had more of an impact.
So TD, what exactly was your policy prescription to move the car inventory off the lots when demand and credit collapsed? Have yet to see a constructive suggestion. This stimulus rewarded the most frugal among us. I would rather see this group benefit than buy out the mortgage of neighbors who have a new BMW every year on their home equity line. And it didn't really steal much demand. My 1998 Volvo did not make the cut off. I waited for C4C because I was watching the German policy and thought it likely we would do the same. So I will still be in the market for a new car when cost-center2 graduates from CAL. They did a pretty good job of limiting the cost. We got quite a bit of stimulus for $ 3 bln. It had the most essential element of Keysian stimulus...a time limit. The money expired. Your tax cuts would not have been as effective.
It seems to me that countries like Germany, Japan, Korea, Sweden and the US know that the ability to bend metal is essential to any war effort. Sacrificing our auto infrastructure to schumpeterian creative destruction is magical thinking. Having our entire heavy industry in Tennessee and run by the Japanese is a very interesting idea. Simply, if you are moving metal then its going to be in Michigan. As it's going, following the Opel decision in Europe, the North American auto industry may be run by the Canadians in 5-10 years. They have suffered from US mismanagement. Thanks to a public health system and a free education system and open immigration, and NAFTA (and global warming) the educated northerners will likely ascend. Cream rises. Do we really think the guys in Tennessee could run their own auto industry?
Germany executed C4C to protect audi, daimler, bmw and vw and Merkel just won a conservative mandate. So this criticism seems to be partisan rather than pragmatic. In fact the US did a better job of C4C. Germany had the scrap dealers execute the paper work and they really weren't staffed for it the way car dealers are. So there was much more fraud in Germany than here. Will it be enough to make the recovery self sustaining? No.
Borrowing money means that the lenders no longer have it to lend to businesses.
Yes YES YES! You got the point.
This counter cyclical borrowing to try to do what exactly will do one thing only. Leave a burden of debt and interest payments.
This isn't a cyclical downturn. This is a structural downturn, where a whole way of doing business failed, with severe repercussions throughout the economy.
This whole 'throw money and liquidity at the problem' is a desperate desire to get the bubble back.
It ain't coming back.
Look, in the US are there not enough cars? Is there not enough debt? If the US manufacturers want to grow, they need to sell into markets elsewhere. How does this boondoggle help them do that?
The mid '90s to 2007 service/consumption driven US economy is gone. It isn't coming back.
I know. The US economy could rebound by selling its stellar record as financial managers.
Derek
I've argued before elsewhere (most recently, here) that the government ought to enact policies designed to increase manufacturing employment in this country. I've also argued that government ought to lift some of the burdens it places on other hard industries that create high paying blue collar jobs. Look up "USEG" on my blog to see my notes on my conversations with that natural resources company's CEO. It's amazing that in the midst of a recession with the worst unemployment in a quarter century, he's got to wade through years of red tape to open a molybdenum mine that would put a lot of people to work at good wages.
Well, this post sure confirms my experience with libertarians. This post simply does not acknowledge the existence of recessions, or any understanding of what they entail.
Note to "The Freedom Minute": some of us understand econ-101 level arguments. In fact, some of us teach econ-101. And some of us also understand that the world works very differently than you might think if you only knew "basic economics."
Ok, one of my best friends has a PhD in Economics and he is a libertarian and agrees with the argument I made above. So I'll see you one econ-101 teacher and raise you one PhD level economist. The reason I gave a basic answer is that I was responding to some very basic arguments and it didn't warrant going into complicated economic theory to counter them. I do understand economic theory quite well and I very much disagree with a good deal of what you posted here, much of which you posted after I had written the post that you are criticizing. If your posts had already been posted here, I would have responded to those posts as well. Thankfully, I don't need to because a number of other posters have already done so, and quite well I might add. I'll certainly admit that there are other schools of economic theory that are in conflict with the Austrian school, but please don't be so arrogant to suggest that whatever school you subscribe to is the only one that could be correct and that everyone else just doesn't understand economics.
By the way, I was making a specific criticism of the c4c program and not really arguing the merits of government spending to get us out of a recession. So thanks for the straw-man argument.
All you have to do to rewrite the unwritten laws of human nature and economics is pass a law in Congress. Then everything will be perfect.
No matter how often it is proven that it is almost impossible to change human behavior, the statists will continue to try forever into the future. That is another law of human nature.
How about this program: Billions of Dollars to Be Burned Under New “Cash for Cash” Program http://optoons.blogspot.com/2009/08/billions-of-dollars-to-be-burned-under.html
@ TallDave: Let the Norks have Seoul
Let Dear Leader take over South Korea, and
the next product out of Hyundai will have
wings and a warhead.
Then we'll bomb Seoul and charge them for rebuilding.
I call it my "Cash for Koreans" program.
@ Jamie: I don't think we're going to see 100% inflation.
Why not ? http://tcsdaily.com/Article.aspx?id=082709A
Of course, there's also the benefits to the environment
These benefits only occur if 1) the cars wouldn't have been replaced soon anyway (the economic benefits also), 2) the new cars have great enough efficiency gains over their lifetime to make up for the enormous amounts of energy required to smelt steel and separate aluminum from bauxite. I once saw an estimate (in the NYT) that a new Prius requires roughly 4,000 gallons of gas to make, so unless you can save that much gas before you get rid of it, environmentally you're better off keeping your old car.
And it's still stupid to mandate that perfectly good cars be destroyed. Much better to let the inexplicably excluded older cars, owned by people who would like to buy the recently-retired "clunkers," be destroyed.
What is your argument here? That CfC was not well-designed in its details, or that the entire idea of it was ridiculous from the beginning? Many posters here are arguing for the latter, and they are clearly wrong.
If you are arguing for the former, that CfC could be done well but the particular implementation here was not, there is some validity to that point. It's probably best to see the bill as a compromise between three competing values:
1. Stimulate the economy by increasing demand for cars;
2. Improve the environment by getting gas guzzlers off the road;
3. Mitigate the negative effect on the poor.
I agree with you that the program should have permitted dealers to substitute older cars for clunkers. That is, the dealer should have been required to destroy one car at least as bad as the one traded in under the program. Thus, they could have sold the clunker for $500 and a trade-in of a really crappy car.
However, it should also be said that there is a long-term benefit to nurturing green car technology and preserving GM and Chrysler as companies (if they can stand on their own within a reasonable time frame) to add competition to the car marketplace. Green technologies are often environmentally costly at the beginning. At its inception, municipal recycling was often an environmental net-negative. When it scaled, however, it became a strong net positive. It's not unlike companies that lose money at the outset before they start making money.
As for GM and Chrysler. . . well, think about what car prices would look like if the car market was dominated by Toyota and Honda, with Ford and Hyundai as lesser competitors. I don't know if there exists any viable would-be entrant who could be more than a niche player.
As W. Buffett might say "This would be a strong buy signal for Ford, if the stock were not so damn expensive."
What is your argument here? That CfC was not well-designed in its details, or that the entire idea of it was ridiculous from the beginning?
Both, I suppose. I think the whole idea of mandating the destruction of cars--any cars--is moronic. Let it ripple through the system and the cars with the least value (which are also usually the most polluting) will naturally be destroyed as the flood of mid-90's used cars gets bought by the 1983 Crown Vic drivers, and the 1983 Crown Vics are sold for scrap. Allow that to happen, and we know the destroyed asset doesn't really have much value so it really is like the hovel you knock down to build a mansion, rather than a perfectly good window you break to replace it with something almost identical.
I think, BTW, you overestimate the clunkiness of most of the cars eligible for the program; it would shock me if most of them were really only worth $500. That doesn't buy you much car.
I also think the environmental benefits are mostly a mirage. If the program did nothing but move a few purchases up a few months (and others down), then there is no benefit to the environment (or the economy). If it created new purchases that wouldn't have occurred at all, or for years, then we'd need to know that the gain in fuel economy would balance out the (quite substantial) energy cost of building a new car--it might, it might not, but the benefits will take years and years to accrue, and in any case nobody seems to be bothering to do the analysis.
From a multiplier perspective, as I said above, it was a good deal because it required a private match. But the highly temporary nature of it makes me doubt the stimulus value is meaningful. And from a social justice perspective--and those who know me know I'm Mr. Social Justice--it's flat out idiotic. The only people who could take part were those who have enough money to 1) own a low-mileage car or SUV instead of an Econobox, and 2) buy a new car essentially on a whim. That is not exactly a segment of the population I feel like giving money to (nor, for that matter, car dealers or UAW workers.)
As for competition, I've seen it reported that of the big 3, only Ford made any money off of it, so it flopped on that score, too.
I just threw out the number $500 more or less at random. The point being that the dealers could make a little bit more money, the public gets a bit higher overall quality and the environment improved a little bit if dealers could swap medium cars for true clunkers. So, yeah, that's a solid point.
I don't think that the social justice benefits were horrid. I suspect that the regulatory beneficiaries were squarely middle class.
The argument that the environmental benefits are useless because they're balanced out by the greater costs of producing the car is bunk. The problem with the argument is that the production of the car has other, economic benefits, such as putting people to work. What matters is not the economic or environmental benefit in isolation, but rather the *combination* of the two.
Total Value = Net Environmental Value + Net Economic Value.
If C4C causes more environmentally friendlier cars to be produced vs. less environmentally friendly cars, assuming the same cost of production, then the Total Value is still net positive, even if the Net Environmental Value as an isolated variable is not.
Both aspects of your argument have been shown to be bunk. several commenters have argued that the multiplier is less than one, and Rob Lyman (along with other commenters) has shown that the fuel savings is less than cost of production. Since both values are negative, this program was negative.
And...it's also been argued that the social justice benefits are negative also, as the truly poor can't afford a new car, their cars were not covered, and their future purchase of a new (to them) clunker will be more expensive.
Although the truly poor probably don't pay much taxes, they will suffer from the "crowding out" effect of funds going to the government instead of private, job-creating investment. They pay a portion of the costs and got no benefit.
If C4C causes more environmentally friendlier cars to be produced vs. less environmentally friendly cars, assuming the same cost of production, then the Total Value is still net positive, even if the Net Environmental Value as an isolated variable is not.
If Net Environmental Value as an isolated variable is negative (because the new cars cost more, environmentally, than they will save over their lives), then to justify the program by saying it has environmental benefits is (ahem) bunk. Because, in that case, it does not have environmental benefits.
Blink. What does "because the new cars cost more, environmentally, than they will save over their lives" mean? And if I take your meaning, or one of them, I would think that the associated break-point would be whether or not they cost less, 'environmentally', than the cars that would have been bought had this program not been in effect.
Note the relevance of the idea that replacing 20 mpg autos with 30 mpg autos is 'better' than replacing 50 mpg vehicles with 100 mpg vehicles.
Yeah, they do that a lot here. The best thing to do is aggressively hit back and point out that, for example, if 60% or 80% or whatever favor a given policy, and you are accused of being a 'leftist'(I should probably have put tics around 'accused' as well), then 60% or 80% or whatever of the public is also 'leftist'.
My theory is that the motivation behind this ploy is to obscure the fact that these people are really quite a small, fringe element who in fact do not enjoy much - if any - popular support. 'Leftists want a public option' (which is actually true, though contextually misleading) sounds like just so much he-said she-said in a tired squabble and makes playing identity politics much easier. 'Most Americans want some sort of a public option' is more accurate, but doesn't translate nearly so well into a tribal sneer. So it goes.
My experience with libertarians is that they vastly overestimate their expertise on any subject that grabs their fancy. Because, you know, they're libertarians, which makes them Heinleinian (or Randian) omnicompetents[1]. But the fact is, having one semester of economics doesn't make you an authority on the subject. Knowing how to differentiate and integrate polynomials (even I can do that!) doesn't make you a calculus whiz. And so on and so forth. There was an interesting back-and-forth a decade or so ago about the fact that your average 'computer scientist' is far more likely to be a libertarian than, say, a chemist which may have something to do with your observation if you want to go dig it up.
[1]Heinlein did not, from what I understand, live up to his own hype in this regard either. And in fact, he had a lifelong hostility towards other people who were more justifiably labeled as such, for example, the truly knowledgeable Isaac Asimov. Heinlein never forgave him for having a PhD or a higher IQ, or for thinking that military service was somewhat less than hunky-dory.
My experience with certain blog discussion posters is that, rather than directly countering the arguments made by those they disagree with by posting relevant facts, they’d rather denigrate and dismiss those arguments by simply claiming that those who posted them overestimate their knowledge of a subject. How convenient.
By the way, ScentOfViolets, my belief that I’m an authority on a number of subjects (and I’ll specifically exclude sports and opera among others) long precedes my embrace of the libertarian philosophy. But regardless of what I may think of my own abilities, thanks for proving that you are just as prone to engaging in a “tribal sneer” as those you rail against.
"Rather than"? Really? How about in addition to? There isn't a substantive contention on this thread not responded to by non-libertarians. I have addressed most of them worth addressing.
1. My comment was aimed specifically at ScentOfViolets. My response to you is included in my comment to your comment to me above.
2. "I have addressed most of them worth addressing." And most of them have been successfully countered.
What does "because the new cars cost more, environmentally, than they will save over their lives" mean?
I don't know exactly what standard is in use by the people who claim this program has environmental benefits, but I was more or less assuming that it was greenhouse gasses. In that case, the question is whether they save more energy (through better MPG) over their service lives than it cost to make them. Whatever standard you use, though, you have to catch the environmental cost of manufacturing.
And if I take your meaning, or one of them, I would think that the associated break-point would be whether or not they cost less, 'environmentally', than the cars that would have been bought had this program not been in effect.
Yes, that's a good standard. I was using a binary "buy/don't buy" assumption, but of course you're right that somebody could have been planning to buy anyway and been steered to a more efficient car (which would mean the program had no stimulus value in that particular case, but positive environmental value).
I would think that is already the case. If you assume a lifetime mileage of 100K miles at 20 mpg, that's 50,000 gallons of gas. That's a lot of kilocalories - far, far more than is needed to, say smelt the iron used for the steel in the car (assuming 2,000 kg or four metric tons.) Actually, this is an excellent example of why an automobile is such an exquisite piece of modern engineering, and why the alternatives - electric, public transport, what have you are so poor in comparison. But of course you see dozens or hundreds of cars on the street every day, while an 'environmentally friendly' electric runabout is the talk of the water cooler.
I was thinking of the complete production cycle. And in that sense, there is very little of any durable manufactured item whose environmental costs aren't a net negative. There was a piece on 'The Talk of the Nation' pointing out that plastic bags are every bit as bad as the paper kind, and that if you really want to go green, you should make the bags themselves reusable - which in our family we already do to a large extent(pats self on back for what is really in the end anal retentiveness.)
If you assume a lifetime mileage of 100K miles at 20 mpg, that's 50,000 gallons of gas.
I occurs to me, reading this, that I have not been using the right standard. Since the new car has (presumably) a longer life ahead of it than the old one, we should really be asking how much gas the new car will be saving over the remaining life of the old car (after which it will be inevitably replaced by the new one), and the manufacturing cost of the new car should be somewhat discounted because it would have had to be made eventually anyway (but some time in the future).
There are probably three groups of CfC participants:
Those who would not have bought a new car anytime soon (Maximum stimulus benefit, much lower or negative environmental benefit)
Those who would have bought a new car, but went for a "green" one as a result of the program (Maximum environmental benefit, minimal stimulus benefit)
Those who would have bought the same car at the same time anyway (no benefits at all).
I have no idea how the program shakes out as between these three groups. It would be nice if someone tried to find out, seeing has how we spent a few billion on it and very well may do the same on something else in the future.
Those who would have bought the same car at the same time anyway (no benefits at all).
Rob - I would think you could say that the stimulus and environmental benefits were both negative in this group. If they would have bought the same car at the same time anyway, then giving them money to do so didn't stimulate the economy and the money could have been used for something else (a true environmental benefit, not taking it from the private sector in the first place, etc.)
My, my, what a nasty and ignorant partisan you are. Let's hit the way-back machine, shall we:
Which then produced the follow-up (and then my follow-up):
What? No statement about the libertarian who said that and set off that rippling commentary? No condemnation of an obviously idiotic and nasty peroration? I'm shocked, shocked I tell you to find yet another little grubby libertarian acting in profound bad faith.
Listen, you negligible little flyweight, you want me to take anything you say seriously, first you'll make some comment about how that remark by TallDave was completely uncalled for. Then you will apologize to me, handsomely, and admit that when people go off like this that they should expect a little blow-back.
Of course, you're not going to do that, because you're simply not capable of behaving like a grown-up. Responsibility. It's not just for people who aren't libertarians.
Wow, I must really have hit a nerve there. I'm sorry that you're so upset that I pointed out that you were making the same kind of "tribal sneer" that you find so offensive when others do it. And I'm sorry that you have such a negative view of libertarians that you have to resort to name calling. I'd ask why that is so, but I don't want to hijack this thread.
For the record, and since you asked so politely, I do think that TallDave's comment was unfair. More importantly, I don't think such comments are helpful in moving the discourse forward but I'm not the comment police so I didn't think it necessary to point out every statement here that I think might be out of line.
As for posters deserving "blow-back", I suppose that you can do that if you wish, but I don't find it the most effective way to communicate, so I'll decline to agree with you that it should be expected.
Now, if you are so inclined, you can apologize to me for making all those assumptions about what I would or wouldn't do and how I'm acting in bad faith. Also, feel free to apologize for calling me nasty, ignorant, and grubby which I think was way out of line considering the relatively mild criticism I offered to your comment. I suspect that if we were face to face, you would have refrained from using such harsh language if for no other reason than that type of behavior is generally frowned upon in polite society. I see no reason why an on-line forum should be any different.
As far as who is incapable of acting like an adult, I'll leave that to the other readers to decide for themselves.
Finally, I have no intention of getting into a flame war with you. I have more important things to do like working so I can help stimulate the economy. :) However, I'm happy to have a respectful, polite conversation about the topic of this article if you wish.
Perhaps the President will invite us the White House to have a beer and work out our differences?
Chuckle. Notice how the fact that I am responding to a bit of mindlessly hostile tribalism in a way that shows how nasty it is just whooshes right by the little guy. But gee, demonstrating by an in-kind response is wrong. And bad. And we're not talking about libertarians doing it, we're talking about you, buddy.
No, I think we can safely say that this 'Freedom Minute' just can't grasp fine details like that. Or else he's deliberately ignoring them ;-)
And yet, somehow, this pathetic little moron suddenly became 'the comment police' when I make a perfectly appropriate in-kind response. Nope. Don't criticize libertarians. Just the people who behave the same way they do when making a reply.
I don't think 'Freebie' here realizes just how deep a hole he's digging. Truly a negligible waste of skin.
And I'm still waiting for an apology. And an admission from Freebie that he was wrong. Not that this will ever happen.
Obviously you are not interested in a civilized discussion. I suspect you might have some deep seated hostility you need to work out or maybe you're just an adolescent troll looking for your jollies. So for the record, I'm done engaging with you.