Breaking: Cash for Clunkers was a dumb idea

[giblets]

Yes. Account for the car purchases that were not induced by the subsidy, but merely shifted in time.

I thought the 125,000 "net increase in sales" accounted for this.

[Ogie Oglethorpe]

Yes. Account for the car purchases that were not induced by the subsidy, but merely shifted in time.

Or to be more succinct, see MRT144 post #45.

[MrFun]

What really strikes me about this subsidy is that it's actually transferring wealth from the poor to the rich, which is absolutely disgusting. But a lot of subsidies end up that way, for example farm subsidies.

I thought since you're a conservative, you would support transferring wealth from the poor to the wealthy?

[Hauldren Collider]

Fun, conservative doesn't mean douchebag. Nobody is for hurting the poor, they only disagree on what would be most effective at alleviating poverty. I think that in general, government makes the situation worse.

[giblets]

Fun, conservative doesn't mean douchebag. Nobody is for hurting the poor, they only disagree on what would be most effective at alleviating poverty. I think that in general, government makes the situation worse.

No, it's not simply a debate on how to maximize human well-being. Plenty of right wingers argue that the rich earned their money and taxing them at a higher rate in order to fund policies that would improve the lot of the poor is "stealing" and wrong.

[Hauldren Collider]

Well I agree with that to some extent but that would suggest being against transfers in general, including those from poor to rich.

[Kuciwalker]

The temporary nature of the program is really the only Keynsian feature. Spending is supposed to be infused quickly and temporarily into the system in bad times using counter cyclical attempts at economic braking and stimulus as the cycle dictates.

I was speaking somewhat imprecisely; the problem was not that it was temporary in the most general sense, but that the timescale of the program was very short compared to the normal timescale of car replacement, combined with certain other details particular to automobiles. Most importantly, the decision of how many cars to own (including whether or not to own one at all) is only partially affected by price.

[Ogie Oglethorpe]

It occurrs to me the article is probably overstating the benefits of environmental benefits to the extent it gives credit to the paltry amounts in any event.

The benefits of reduced fuel consumption of newer models and resulting reduced emissions has to be offset by the externalities of the production of the new cars in the first place. I see no indication that this was considered. Likewise the environmental cost of destroying the 'clunkers'.

[Ogie Oglethorpe]

I was speaking somewhat imprecisely; the problem was not that it was temporary in the most general sense, but that the timescale of the program was very short compared to the normal timescale of car replacement, combined with certain other details particular to automobiles. Most importantly, the decision of how many cars to own (including whether or not to own one at all) is only partially affected by price.

Thus the decision to impact durable goods volumes via this approach is unwise. On that I agree.

[Kuciwalker]

I thought the 125,000 "net increase in sales" accounted for this.

I have no idea what calculations went into that number, but given the extraordinary difficult of estimating that effect I doubt it.

The fact is, there are compelling reasons that were obvious beforehand to believe that Cash for Clunkers was an idiotic program, much like the new homeowner tax credit. This is not some sort of ideological debate; it's a matter of investing some minimal thought into the consequences of your economic interventions.

Of course, Cash for Clunkers and the new homeowner tax credit were incredibly popular for precisely the same reason that they were horrible policy - for most participants, they amounted to free money that required no change in behavior. It's the mirror image of Pigovian taxes, which are typically excellent policy because they reduce economically damaging behavior, but are unpopular precisely because their consequences are maximally felt by those subject to them.

[MrFun]

Fun, conservative doesn't mean douchebag. Nobody is for hurting the poor, they only disagree on what would be most effective at alleviating poverty. I think that in general, government makes the situation worse.

Why sooooo serious?

[MOBIUS]

I for one think CfC is great!

Hundreds of thousands of old and fuel inefficient cars have been destroyed and replaced by new and more fuel efficient ones. Also, the very people who are likely to be fat and have unhealthy lifestyles, the poor, have been priced out of the car market, resulting in less overall car journeys and the fact that they'll be forced onto public transports or walk!

Awesome!

[KrazyHorse]

The per-unit cost of fuel use/emissions reductions provided by the CfC program is, even under the static analysis (that drivers of more efficient cars will not drive more), an order of magnitude higher than other available techniques.

[Hauldren Collider]

How exactly does one create carbon credits? Who defines them?

[Kuciwalker]

The government says "there exist N credits, we have M of them and the remaining N-M are allocated among various private parties according to this formula" and then the government auctions off the credits.