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Saturday, August 29, 2009

Clunkermania: Top Good News Economic Story of the Year

This week marked the end of the Cash for Clunkers program. Many have called it one of the best economic stimulus programs ever implemented. Of course the White House has called it "Wildly Successful."

"This is one of the best economic news stories we’ve seen and I’m proud we were able to give consumers a helping hand," said US Transportation Secretary Ray LaHood.

The White House Council of Economic Advisers, released preliminary analysis on the program:

1. Their analysis estimates that the program will boost Q3 economic growth by 0.3-0.4 percentage points because of resultant automobile sales in July and August.

2. The program will sustain the increase in Q4 GDP because auto production will continue in order to replace depleted showroom inventories.

3. Clunkermania will create or save 42,000 jobs in the second half of 2009. It is further expected that those jobs will remain well after the program’s close.

The program, combined with earlier economic stimulus, has second half economic growth coming on strong.


  1. GNE,

    Scott Granis' post takes a different approach to the Cash for Clunkers program. Don't you agree that a lot of wealth is destroyed when the govt. encourages people to trash cars that would otherwise still serve their purpose and transfer wealth through higher taxes to pay people to buy a car they don't need?

  2. Although I frequently agree with Scott, there are many times I do not.

    Assuming an average sales price of a new car at about $28,000 and the estimates in at 750,000 purchases, that translates to a $21B boost to the auto industry at a price tag of less than $3B. Such a return on investment in the US economy is very smart money. I am certain that all those positively effected in the auto industry would agree...

    This is the type of "prime the pump" stimulus that typically yields on-going benefits for an industry well beyond what Chris Edwards calls a "sugar high."

    What Scott also completely ignores is the environmental benefit of taking this "used car wealth" off the market (and out of the atmosphere.) We have yet to do well worldwide at quantifying the "green" costs and benefits of such programs. I don't know if it is $3B worth, but I am convinced it is much greater than zero dollars.

    So my positive spin:
    Cost: much less than $3B
    Benefit: much greater than $21B

    Bottom line: Wildly Successful



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