Planet Gore

AP Analyzes Cash for Clunkers

Not the stimulus the Dems would have us believe:

WASHINGTON (AP) — The popular ”cash-for-clunkers” program may be a well-timed shot of adrenaline for the economy, but it’s not a prescription for a lasting recovery.

The federal rebates of up to $4,500 to drivers who trade in a gas guzzler for a more fuel-efficient vehicle are steering cash to car dealers, giving a boost to troubled automakers and generating much-needed sales taxes for cities.

All this will help the economy grow faster in the second half of the year than previously forecast. Yet the rebates will also steal economic growth from the future: They make car sales happen now that would have been made later anyway.

”Cash for clunkers,” soon to be a $3 billion program after an expected extension from Congress, comes at a critical time for the economy. Recent data suggest the country is finally emerging from the worst recession since World War II.

And clunker cash delivers more than just an isolated jolt to the auto industry. More business for auto dealers, manufacturers and parts suppliers could mean fewer layoffs or even some hiring, meaning more people are spending money throughout the economy.

But the rapid success of ”cash for clunkers’’ — it’s credited with making July the best month for car sales in nearly a year — does not mean the program should be expanded to, say, $10 billion.

There are only so many people looking to trade in pickups for hybrid sedans. And there are only so many people who can afford to.

Even if clunker cash helps the economy expand at a 4 percent annual rate from July through December — the high end of the most optimistic forecasts — underlying problems will make the pace hard to sustain.

Consumers, the lifeblood of the economy, lack confidence. Their take-home pay is flat or falling. Some of them are expanding their debt with bigger car loans. And the outlook for jobs remains lousy.

The ”cash-for-clunkers” program has provided a burst of sales that will give auto makers and their suppliers a need to replenish thin inventories. That’s good news for people who work at dealerships, auto plans and parts factories.

But the help is likely to be short-lived.

The rest here.

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