UNEXPECTEDLY: Even By Keynes’ Standards, Cash For Clunkers Was A Complete Failure.

Three economists (from MIT and Tex A&M) have crunched the numbers and discovered that Obama’s Cash-for-Clunkers scheme back in 2009 was a failure even by Keynesian standards.

The abstract of the study tells you everything you need to know.

The 2009 Cash for Clunkers program aimed to stimulate consumer spending in the new automobile industry, which was experiencing disproportionate reductions in demand and employment during the Great Recession. Exploiting program eligibility criteria in a regression discontinuity design, we show nearly 60 percent of the subsidies went to households who would have purchased during the two-month program anyway; the rest accelerated sales by no more than eight months. Moreover, the program’s fuel efficiency restrictions shifted purchases toward vehicles that cost on average $5,000 less. On net, Cash for Clunkers significantly reduced total new vehicle spending over the ten month period.

This is remarkable. At the time, the most obvious criticism of the scheme was that it would simply alter the timing of purchases.

And scholars the following year confirmed that the program didn’t have any long-run impact.

But now we find out that there was impact, but it was negative.

You don’t create wealth by destroying it, and you don’t alleviate stagnant incomes by making things more expensive — which shouldn’t be news to anyone but the most devoted followers of Keynes.

SHOCKING NEWS FROM THE WORLD OF ECONOMICS: Cash for Clunkers Was a Complete Failure.

Three economists (from MIT and Tex A&M) have crunched the numbers and discovered that Obama’s Cash-for-Clunkers scheme back in 2009 was a failure even by Keynesian standards.

The abstract of the study tells you everything you need to know.

The 2009 Cash for Clunkers program aimed to stimulate consumer spending in the new automobile industry, which was experiencing disproportionate reductions in demand and employment during the Great Recession. Exploiting program eligibility criteria in a regression discontinuity design, we show nearly 60 percent of the subsidies went to households who would have purchased during the two-month program anyway; the rest accelerated sales by no more than eight months. Moreover, the program’s fuel efficiency restrictions shifted purchases toward vehicles that cost on average $5,000 less. On net, Cash for Clunkers significantly reduced total new vehicle spending over the ten month period.

This is remarkable. At the time, the most obvious criticism of the scheme was that it would simply alter the timing of purchases.

And scholars the following year confirmed that the program didn’t have any long-run impact.

But now we find out that there was impact, but it was negative. Here’s the most relevant graph from the study. It shows actual vehicle spending and estimated spending in the absence of the program.

Much more at the link.

ANOTHER BRILLIANT “GREEN” INITIATIVE FAILS: Whoops—’Cash for Clunkers’ Actually Hurt the Environment.

AUSTAN GOOLSBEE: Hey, maybe that “Cash For Clunkers” thing was a mistake.

CHANGE: Feds Moving EV Tax Credits To “Cash For Clunkers” Model.

READER JOHN STEAKLEY WRITES:

Cash for Clunkers has artificially inflated used car costs, punishing those frugal souls who bargain shop in the used car market.

God, if only someone had warned us about this a year ago!

Yeah, if only.

CASH FOR CLUNKERS: A RETROSPECTIVE. Top-down industrial policy carried out through the sheer force of incentives is welcomed by behavioralist Washington.

UPDATE: Reader Paul Jackson writes:

Before the first piece comes out that postulates “Where it all went wrong for Obama”, may I be the first to say: when he took that ill-fated trip to Copenhagen in order to secure Chicago’s 2016 Summer Olympic bid. That was the first time the public at large sat up and thought it was amateur hour at the White House. They haven’t done much since to dispel that notion.

On an unrelated note, given the consistent media phrasing of “the worst economic crisis since the Great Depression”, high unemployment, mortgage failures galore, how come Whoopi/Robin/Billy haven’t done an HBO special for the homeless/out of work? Surely there must be more homeless people than ever in our recent history? Did we, without my knowledge, already solve that problem? I know, I know, doesn’t fit the narrative.

It’s all about the narrative.

A REASON TO LOVE “CASH FOR CLUNKERS:” “It is a fabulous demonstration project for just how utterly pointless government stimulus programs can be. Stimulus programs tend to be hard to evaluate in our complex economy — sort of like trying to calculate the effect of a butterfly flapping its wings on world climate. But since cash for clunkers only lasted a few weeks and hit only one industry, we can learn a lot about the effectiveness of government stimulus.”

DECLINE UN-HIDDEN: ‘Cash for Clunkers’ Impact on GDP Half of What Was Originally Estimated.

LINE OF THE WEEK, in response to the White House’s criticism of Edmunds.com on Cash For Clunkers: “If Obama’s skin was any thinner, he’d have a reservoir tip on the top of his head.”

Or, a bit less pithily, here: “Yeah, it’s one thing for the administration to take office with very little administrative experience. It’s something else that the administration apparently hasn’t aquired any yet, one year later, and are still throwing prissy little snits over events and reporting that are about five levels below anything the administration should be concerning itself with right now.”

ONE OF WASHINGTON’S ALL-TIME DUMB IDEAS: Cash For Clunkers Hurts Poor, Fails to Help Automakers.

MEGAN MCARDLE: How’s That Cash-for-Clunkers Deal Working?

TOP TEN “GREEN” CARS that met their fate during Cash for Clunkers.

BOSTON GLOBE: Cash For Clunkers a “complete waste of taxpayer money.”

HEALTH CARE for Clunkers.

TAX FOR CLUNKERS: TaxProf is on the story.

JOHN STOSSEL on Cash For Clunkers.

I THOUGHT IT WAS SUPPOSED TO HELP AMERICAN CARMAKERS: Big winners in Cash for Clunkers: Toyota, Honda, and Nissan.

DEBACLE, DISCONTINUED: Obama admin. to end cash for clunkers on Monday. Smart move — people were starting to wonder why they could handle healthcare when they can’t even deal with used cars.

Plus, from Dan Riehl: “The announcement of the end of the Cash for Clunkers program combines that special type of honesty you can only get when government and the media both join in.” Otherwise known as dishonesty, of course. . . .

THEY CAN’T HANDLE THIS, BUT THEY’LL HANDLE HEALTHCARE? Dealers stiffed as clunkers pile up. “Some New Mexico auto dealers have backed out of the cash-for-clunkers program and more may do so as the federal government takes its time providing cash reimbursements. Dealers across the state are owed more than $3.6 million, according to a dealers’ group which says that so far Uncle Sam has only written three checks totaling about $14,000.”

(Emphasis added). They promised FedEx, but they’re delivering the Post Office. . . .

BUT DON’T WORRY, GOVERNMENT HEALTHCARE WILL WORK PERFECTLY: NY dealers pull out of clunkers program. “Hundreds of auto dealers in the New York area have withdrawn from the government’s Cash for Clunkers program, citing delays in getting reimbursed by the government, a dealership group said Wednesday. The Greater New York Automobile Dealers Association, which represents dealerships in the New York metro area, said about half its 425 members have left the program because they cannot afford to offer more rebates. They’re also worried about getting repaid.”

CASH-FOR-CLUNKERS: Lining the pockets of at least one millionaire.

CASH FOR CLUNKERS: Stiffing the auto dealers? “Rep. Joe Sestak says only 2 percent of claims have been paid and that four of every five applications have been ‘rejected for minor oversight.'”

AN OPEN-THREAD DISCUSSION ON CASH FOR CLUNKERS. “My most honest, most visceral response to Cash for Clunkers is sadness–sadness that old cars are being destroyed before their natural end. Older cars are rolling history. Chevrolet isn’t making any more 1991 Chevrolet Caprices, for example. These cars are a non-renewable and, in my mind, precious resource.”

Somebody emailed me the other day with this thought: Cash For Clunkers is just “death panels” for cars. Ouch. First Grandma’s Caprice, then Grandma?

OBAMA’S AUTO PITFALLS: “Media fascination with the government’s new ‘cash for clunkers’ program is diverting public attention from President Obama’s extraordinary long-term intervention into the automotive sector of the U.S. economy. Since the impact of ‘cash for clunkers’ will be modest and temporary, the more consequential reforms are the massive subsidies to a limited number of vehicle manufacturers and suppliers organized by the United Auto Workers; the new subsidy programs that favor electric cars and plug-in hybrids over ordinary hybrids, clean diesel technology, and other fuel-saving innovations; and the revamped federal mileage standards that supersede—or at least delay—the practical impact of California’s complex program to reduce greenhouse gas emissions from cars, a program that was replicated by legislatures in at least a dozen other states.”