The initial estimates were 1.6 for spending and 1.0 for tax cuts. And Romer’s own research indicates that her figures are more likely to be underestimates than overestimates because of omitted variable bias.
I don’t think I’ll have time to go through any of these figures myself, but the CEA published its own evaluation of the cash-for-clunkers program, available here. From what I can tell, they think it was effective, but of course, they’re a part of the administration.
Detroit papers said in Michigan about 85 % of the cars bought in the program were the Big 3. Across the nation it was about 43 % American cars.
Let’s not forget, either, that many of the “extra sales” may simply have been people replacing cars a month or two earlier than they would have otherwise. In other words we may see a slump in car sales simply because of this drag-forward effect.
Heh, I think Rush Limbaugh nailed it.
Moved third quarter auto sales to the first.
In fact, the analysis shows exactly that.
I have the complete CARS database on my computer, and i ran the numbers on this. The figures i got were close, but not quite the same.
For the US, i got:
**260,546 Big 3
677,081 Total
39.48%**
For Michigan, i got:
**24,903 Big 3
31,256 Total
79.67%**
Now, it could be that, in my ignorance of every make owned by the Big 3, i’ve missed one or two makes. Below is the complete list of Makes from the CARS database, followed by the list of makes that i selected as being part of the Big 3. See if i’ve made any errors:
Makes:
Trade_in_make
Acura
Alfa Romeo
AM General
American Motor
ASC Incorporat
Aston Martin
Audi
Aurora Cars Lt
Austin Rover
BMW
Buick
Cadillac
CCC Engineerin
Chevrolet
Chrysler
Dodge
Eagle
Excalibur Auto
Federal Coach
Ford
General Motors
GMC
Honda
Hyundai
Import Trade S
Infiniti
Isuzu
J.K. Motors
Jaguar
Jeep
Kia
Laforza Automo
Lambda Control
Land Rover
Lexus
Lincoln
Maserati
Mazda
Mercedes-Benz
Mercury
Merkur
Mitsubishi
Nissan
Oldsmobile
PAS, Inc/GMC
Peugeot
Plymouth
Pontiac
Porsche
Roush Performa
Saab
Saturn
Sterling
Subaru
Suzuki
Toyota
TVR Engineerin
Volkswagen
Volvo
Wallace Enviro
Big 3:
Buick
Cadillac
Chevrolet
GMC
Pontiac
Saturn
Ford
Lincoln
Mercury
Chrysler
Dodge
Jeep
Oldsmobile
Eagle
General Motors
Plymouth
I left out Volvo, even though Ford owns it. Maybe it should go in, but Volvos accounted for fewer that 1,000 CARS transactions, so it wouldn’t make much of a difference. I’m not including Mazda, because Ford only has a 13% share.
OK would you guys like a little first hand info on C4C?
I am a service manager at a car dealership. I was responsible for the destruction of the clunkers that were turned in, and I drove all of them at my dealership. Furthermore as a member of management I aware of car sales both new and used on a monthly basis.
From January til C4C my dealership sold about 50 new and used cars per month. Pretty much like clockwork. About 65% used 35% new.
C4C came along. The first month we sold 75 cars total. The second month we sold 100 cars total. (round numbers, I think the second month might have been 103, but I don’t recall) We held just about the same percentage of new to used.
We did a total of eight, count them eight clunker deals.
the month after C4C we were back to 50 cars.
So for the cost of 8 rebates we sold 175 cars where historically we would have sold 100. By my math that is a 75% sales increase.
But the average fuel mileage was 16MPG! you say. Nope sorry, trust me there has never been a more aptly named government program that cash for clunkers. The only way it could have been more aptly named would be if they called it cash for shitboxes. You can’t compare the emissions or MPG of these cars when they were new, they aren’t new and were probably gross polluters. From an environmental point of view this was a home run from what I saw.
Out of the 8 clunkers I had, I think that 6 of them would be totally unable to achieve 16 mpg in the condition they were in. I would be amazed if three of them could hit 6 MPG. These cars were in TERRIBLE condition.
IIRC I posted in a thread about C4C when the program was going on that I probably had enough money in my pocket to cover the actual total cash value of the first 4 cars that were traded in.
Example 90 something Ford Exploder. Not a straight panel on the car. 186,000 miles. Can ran on maybe 6 cylinders, too bad it was a V8. Interior falling apart, check engine light on, AC inop, bad transmission, bald tires, and the radio didn’t work. What is this fine auto worth? $50?
the next three were no better.
There was a downside, my service business when down in September as a number of people that would have normally brought their car into my shop in September traded them in during July and Aug, so my service business was off.
What sort of cars does your dealership sell, Rick? I was under the impression that you were a Volvo guy. Is that still correct?
While i don’t doubt your numbers, Rick, my first response is to scream the rallying cry of statisticians: Small sample size!!!
By your own admission, you did a total of 8 C4C deals. Probably doesn’t make your dealership a representative sample for the program. Furthermore, you say that the program netted you 75 extra sales. Leaving aside the whole “correlation doesn’t equal causation” issue for a moment, and assuming that all 8 of your C4C deals received the maximum allowance of $4500, this means that you netted 75 extra sales for a total cost to the taxpayer of $36,000, or a cost of just over $500 per incremental sale.
If the program as a whole had indeed achieved this level of efficiency, there’s a good chance i’d be cheering it right now. If your figures had carried over to the whole industry, the program would have resulted in almost 6 million (!!) extra car sales over the life of the program. But your figures are atypical. Even the National Automobile Dealers Association economist, who argues that the program was a success, claims a cost of $4,587 per extra vehicle sale, and the President’s Council of Economic Advisers’ most optimistic estimate is that the program increased overall 2009 sales by about 560,000 cars.
I’m not going to argue with you about the fuel economy of the clunkers. I’m sure you’re right that plenty of the cars brought in under the program were poorly-maintained shitheaps that belched smoke, burned oil, and probably got about 14mpg in real-life driving. It’s good to get cars like this off the roads. I still maintain my objection, however, to a program like this subsidizing V8 trucks and SUVs that barely manage 20mpg on the highway.
I also think that the upper limit on the price of the new vehicles was too high, at $45000. With the full credit, such a vehicle still costs the buyer over $40,000. I don’t think, in a time of economic belt-tightening, that we should be handing out thousands of bucks to people who can afford to drop 40 grand on a new car. We had a Doper who was searching BMW dealers trying to find one who would do a C4C on a new 335d. As it turned out, this Doper’s local dealers weren’t very interested in participating in CARS, but according to the database over 100 335d’s were sold under the program. That’s an expensive luxury sports sedan, and anyone who can afford one shouldn’t be getting 10 percent of the purchase price subsidized by the taxpayer.
And all this doesn’t even touch on the effect that the program had on the used car market, driving up prices for the very people who can least afford to pay them.
Anyone who can afford one is going to be paying at least 10% more of the purchase price in taxes anyway, so you’re not subsidising anything. Even ignoring everything except federal income tax, if they’re in a 35% tax bracket all this means is that you’re charging them 145% instead of 155% of the purchase price.
Irrelevant.
The income tax and other tax burdens were already in place. These people were already paying $X in taxes anyway. The only thing that changes with the CARS program is that they get $4500 that they would not otherwise have received.