Bye-Bye Clunkers

Bye-Bye Clunkers

One of the common threads you'll see in the discussion about "cash for clunkers" is that it was a phenomenal success (see here and here for examples). The program did manage to lift auto sales temporarily by 600,000 units, that much is true. Unfortunately, July and August sales are likely borrowing from future sales as some buyers opted to push forward their purchases to receive the higher trade-in value for their clunkers instead of waiting a few months and settling for residual value.

With all that aside, the primary reason many economists favor the C4C as a form of economic stimulus is that it injected money directly into the economy with only modest amounts of bureaucratic seepage. No one is arguing that the program will create a lasting recovery in manufacturing; however, many would agree that it bought the industrial sector a little time as it waits for economy to heal.  In the meantime, don't expect the new cash for obsolete appliances to yield the same bang-for-the buck since consumers probably have less pent-up demand for a new fridge than a new car, not to mention the fact that the appliance program is mired by an added layer of bureaucracy at the state government level.

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