| Did "Cash for Clunkers" Cost Taxpayers $24,000 Per Car Sold? | | Print | |
| Written by Thomas R. Eddlem | ||||||||||||||||||||
| Monday, 02 November 2009 00:00 | ||||||||||||||||||||
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For that price, the federal government could have purchased the 125,000 cars outright at manufacturer suggested retail prices, such as a Ford Fusion, Focus or even a Mustang, and then handed each of the recipients an additional bonus check averaging the Cash-for-Clunkers subsidy of $4,000. Or they could have bought every one of those 125,000 people a Smart car and then given them a check for $6,000. Edmunds.com analyzed the plummeting auto sales in the United States market during September and concluded that the program generated only 125,000 additional automobile sales over and above what would have been purchased by consumers anyway. Edmunds.com then calculated the cost of each new car by dividing the program's $3 billion funding by 125,000 cars and found the cost to be $24,000 for each additional car sold. The average purchase price of a new car under the program was only $25,000, according to Edmunds. The White House responded by describing the Edmunds analysis as coming from “Mars,” adding that: This faulty assumption leads Edmunds to a conclusion that is at odds with many independent analyses: Edmunds assumption that more than 80% of the payback from Cash for Clunkers would occur in 2009 isn't how many mainstream analyses ... approach the problem. The problem with the White House complaint is that the “mainstream analyses” cited by the White House consisted entirely of old predictions, none of which had the benefit of industry September sales data. In other words, the White House “mainstream analyses” were based upon predictions rather than actual data. And the same President's Council of Economic Advisors' study cited by the White House press office in its complaint about Edmunds even admitted as much, stressing: The clearest conclusion that can be reached from a careful examination of these data is that they do not provide much reliable evidence on the key question we want to address: the timing and magnitude of the payback effect. While the direct effect of the incentives is clear enough (and highly statistically significant), no statistically robust pattern appears to characterize the aftermath of incentive programs. In fact, the data do not clearly reject the theory that sales simply return to normal after an unusually generous incentive scheme ends. The White House press office also objected on the grounds that the program created new jobs: Most importantly, this program is helping boost our economy and create jobs now when we need it most. In a comprehensive report, the Council of Economic Advisers estimated that the Cash for Clunkers will create 70,000 jobs in the second half of 2009. If we take the White House analysis seriously, then these new hires will be laid off as soon as inventories reach acceptable levels once again. Edmunds explained in a response to the White House criticism that "no manufacturer increases production — a decision with long-term consequences — based on the 30-day sales blip triggered by an event like Cash for Clunkers.” And they went on to explain in their rebuttal: Apparently, the $24,000 figure caught many by surprise. It shouldn't have. The truth is that consumer incentive programs are always hugely expensive when calculated by incremental sales — always in the tens of thousands of dollars. Cash for Clunkers was no exception. The White House claims that our analysis was based on car sales on Mars and that on Earth, the marketplace is connected. We agree the marketplace is connected. In fact, that is exactly the basis of our analysis. That's exactly right. There is no money tree. There is no way for government to create money out of thin air without first taking it from taxpayers. And government is never as efficient as the American consumer. Photo: AP Images
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Flu-Bird
said:
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The federal $3 billion “Cash for Clunkers” program promoted by the Obama White House last summer cost an average of $24,000 per additional car sold, according to an 
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Obama serving pork So wheres the change they were expecting from the tax and spend liberal demacrats it looks like more tax money spent and theres extra serving of pork from OBAMA and his hawgs |
Mikedudical
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Cash4wasting The Government invents Cash4Clunkers and repossessions are rising daily (see www.repofinder.com) It's a Government induced bubble that's going to pop and leave us worse off. We're pumping more cars into a market that is already saturated with repossessions. I can't wait to see the next brilliant idea cooking in Washington DC |
Bonnie
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What they didn't tell you - part 1 Ignore all the fuel savings, etc and just look at how the car buyer got taken to the cleaners: If you traded in a clunker worth $3500, you get $4500 off for an apparent "savings" of $1000. That is, you could have gotten $3,500 if you had just traded the car in. So you just really are $1,000 ahead at this point. However, you have to pay taxes on the $4500 come April 15th (something that no auto dealer will tell you). If you are in the 30% tax bracket, you will pay $1350 on that $4500. So, rather than save $1000, you actually pay an extra $350 to the feds. In addition, you traded in a car that was most likely paid for. Now you have 4 or 5 years of payments on a car that you did not need, that was costing you less to run than the payments that you will now be making. |
Bonnie
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What they didn't tell you - part 2 But wait, it gets even better: you also got ripped off by the dealer. For example, every dealer in LA was selling the Ford Focus with all the goodies including A/C, auto transmission, power windows, etc for $12,500 the month before the "cash for clunkers" program started. When "cash for clunkers" came along, they stopped discounting them and instead sold them at the list price of $15,500. So, you paid $3000 more than you would have the month before. (Honda, Toyota , and Kia played the same list price game that Ford and Chevy did). |
Bonnie
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What they didn't tell you - part 3 So lets do the final tally here: You traded in a car worth: $3500 You got a discount of: $4500 --------- Net so far +$1000 But you have to pay: $1350 in taxes on the $4500 -------- Net so far: -$350 And you paid: $3000 more than the car was selling for the month before ---------- Net -$3350 We could also add in the additional taxes (sales tax, state tax, etc.) on the extra $3000 that you paid for the car, along with the 5 years of interest on the car loan but lets just stop here. So who actually made out on the deal? The feds collected taxes on the car along with taxes on the $4500 they "gave" you. The car dealers made an extra $3000 or more on every car they sold along with the kickbacks from the manufacturers and the loan companies. The manufacturers got to dump lots of cars they could not give away the month before. And the poor consumer got saddled with even more debt that they cannot afford. The governments merry men convinced Joe consumer that he was getting $4500 in "free" money from the "government" when in fact Joe was giving away his $3500 car and paying an additional $3350 for the privilege. |
