Planet Gore

Who Collects the Clunker Cash?

Timothy Carney in today’s Washington Examiner:

But the benefit to carmakers is not as straightforward as you might think. Two experts — car-selling Web site Edmunds.com and economic modeler Macroeconomic Advisers — estimated that a vast majority of the trade-ins that take advantage of Cash for Clunkers would have happened anyway. Some people delayed trading in their cars after they heard in June that the program was in the making. Some people hurried up their purchases to get rebates while they lasted. In other words, most of the boom in car sales this past week were not “new sales,” but sales stolen from Independence Day and Labor Day.

The first benefit of the subsidy is in boosting sales prices and lowering trade-in payments. It’s not as if dealers simply charge $4,500 less than they would have and pass the entire subsidy onto the buyer — dealers still charge as much for a new car and pay as little for a trade-in as their customers will allow. The subsidy is split between dealers and customers.

And who are the customers? Not poor people — they don’t shell out five figures for new cars. No, this is a middle-class to upper-middle-class subsidy, which is probably why politicians love it so much.

But the real benefit to business — and harm to the economy — comes after the car sale. The law requires the dealers destroy the “clunker” engine (which, to be eligible, was drivable upon trade-in), scrap the car and shred almost all its parts. This government-required waste reduces the supply of used cars on the road. Reduce the supply of drivable used cars, and you drive up the price of all cars.

This supply reduction is the real stimulus for automakers and new-car dealers, and it comes at the expense of every consumer who didn’t take advantage of Cash for Clunkers — especially those who can’t afford a new car. The program taxes used-car buyers to subsidize new-car buyers.

And check out Ben Zycher’s confession on the Corner yesterday.

Most Popular

White House

For Democrats, the Party’s Over

If the Democrats are really tempted by impeachment, bring it on. Since the day after the 2016 election they have been threatening this, placing their chips on the Russian-collusion fantasy and then on the phantasmagoric charade of obstruction of justice. The attorney general accurately gave the ingredients of the ... Read More
Politics & Policy

The Worst Cover-Up of All Time

President Donald Trump may be guilty of many things, but a cover-up in the Mueller probe isn’t one of them. House Speaker Nancy Pelosi, attempting to appease forces in the Democratic party eager for impeachment, is accusing him of one, with all the familiar Watergate connotations. The charge is strange, ... Read More
PC Culture

TV Before PC

Affixing one’s glance to the rear-view mirror is usually as ill-advised as staring at one’s own reflection. Still, what a delight it was on Wednesday to see a fresh rendition of “Those Were the Days,” from All in the Family, a show I haven’t watched for nearly 40 years. This time it was Woody Harrelson ... Read More
Politics & Policy

The Democrats’ Other Class War

There is a class war going on inside the Democratic party. Consider these two cris de couer: Writing in the New York Times under the headline “America’s Cities Are Unlivable — Blame Wealthy Liberals,” Farhad Manjoo argues that rich progressives have, through their political domination of cities such as ... Read More