From The Heritage Foundation:

Is This What Passes for Economic “Success” in the Obama Administration?

Celebrating the fact that his administration has blown through $1 billion in deficit spending on the “Cash for Clunkers” program in just one week, President Barack Obama said Friday: “I’m happy to report that it has succeeded well beyond our expectations and all expectations.” And just what exactly has the “cash for clunkers” program succeeded at?

Cash for Clunkers Has Not Helped the Environment: Thanks to the inclusion of SUVs and small trucks in the program, you could, in theory, trade in a Hummer that got 14 mpg to get $3,500 for a brand new 18 mpg SUV. Not exactly a leap forward for the environment. Worse still, that Hummer and all the other clunkers then get shredded– thus destroying 200,000+ cars before their full use. Once you factor in all the pollution from manufacturing new cars to replace the prematurely shredded cars, it is unlikely you’ll see any net reduction in carbon.

Cash for Clunkers Has Not Helped Consumers: New cars are not a consideration for many consumers. Many go straight to the used car market, especially in tough times. Taking 200,000+ cars off the road will reduce the supply of used cars. Economics 101 tells us that a decreased supply coupled with steady demand will lead to higher prices. Driving up the cost of older cars may be an intended consequence for policymakers to encourage people to buy new, but it’s a bad deal for consumers.

Not Stimulating the Economy: The Obama administration claims that Cash for Clunkers will stimulate the economy by increasing new car sales this year. But the CEO of Edmunds.com, a new and used car sales website,  notes that the program will not increase yearly car sales totals: “The 200,000-plus deals the government was originally prepared to fund through the program’s Nov. 1 end date were about the ‘natural’ clunker trade-in rate. … We have crammed three to four months of normal activity into just a few days. What everyone fails to realize is that once this backlog is met, interest in the program will fade.”

Economists looking at Clash for Clunkers are having New Deal deja vu. UC San Diego economics professor James Hamilton blogs:

One of the more embarrassing features of the New Deal was the Agricultural Adjustment Act of 1933, which paid farmers to slaughter livestock and plow up good crops, as if destroying useful goods could somehow make the nation wealthier. And yet here we are again, with the cash for clunkers program insisting that working vehicles must be junked to qualify for the subsidy.

The only thing Cash for Clunkers has succeeded in is wasting $1 billion of tax payer money in record time. No wonder Obama has declared it a success “well beyond our expectations.”

And even from The New York Times:

‘Cash for Clunkers,’ By the Numbers

The “cash for clunkers” program introduced last week appears to have been a success, at least based on the tens of thousands of consumers who streamed into their local car dealers to swap their beaters for new, more fuel-efficient replacements.

But there is more to the numbers than the headlines. According to a survey of car dealerships and 2,200 consumers by CNW Research, the average fuel economy of vehicles traded in last week was 16.3 miles per than the 18 m.p.g. needed to qualify for a government rebate of $3,500.

The relatively small differential suggests that consumers have not been turning in the oldest, dirtiest and least fuel-efficient cars, but instead have been getting rid of their second and third cars, according to Art Spinella, who ran the survey.

“These are third cars used for kids in school,” Mr. Spinella said.

The vehicles that consumers bought with their credits had average fuel efficiency ratings of 24.8 miles a gallon, he said.

Lawmakers hoped the “cash for clunkers” program, formally known as the Car Allowance Rebate System, would reduce America’s dependence on imported oil. But the early results of the program suggest that may not happen. The vehicles turned in were driven about 6,000 miles a year, he said. If the new vehicles are driven about 12,000 miles a year, the rough annual average, then consumers will actually use more fuel, not less.

“The energy independence argument did not ring true, at least so far,” Mr. Spinella said.

He added that the average annual income of those who bought cars with their rebates was $57,700, just under the $61,000 for all new car buyers these days. That suggests that consumers with the lowest incomes who, in theory, need the rebates most, are not benefiting from the program.

One of the problems, Mr. Spinella said, is that even a $4,500 rebate may not be enough to persuade consumers to turn in their cars, particularly if they are unable to borrow from cautious auto dealers.

“Some of the folks who drive a beater all the time are unlikely to get a new car loan,” he said. “That’s one of the problems with the program.”

Read more:

• Cash For Clunkers: Do You Mind Paying For Someone Else’s Car?
• Clunker Health Care Reform
• Is Cash for Clunkers Stimulating the Economy?
• Billion-Dollar Car Crash
• How Much Is That Clunker in the Window?
• Democrats trying for GOP support for clunker funds
• American Cash & Clunkers Fund Foreign Automakers

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