The plan worked to serve two purposes:
1 to stimulate new car sales; and
2. to get people out of gas guzzling clukers and into more efficient cars.
Is it working?
I don't know.
What do the car sales look like, and how many gas guzzlers have been traded in to take advantage of this program?
Anyone actually have any figures on this?
Absolutely right.
The theoretical aspect of the program worked correctly.
It was expected to do what it did: encourage the pruchases, and, essentially be a 'targeted tax refund.'
Now, I would have liked to see the Dems support an across the board cut, but Dems like to use the money to make sure that folks do what the Dems want them to do. It worked this time.
Even in times like these, there are approximately 1 million sales per month, so the cash-back was expected to stimulate about one weeks buys. It did.
Now, if I were in charge, I would have done this and the same for homes instead of the Stimulus Pkg, but at this point I would continue the program.
To what extent did the program increase overall new car sales as opposed to just influencing choices about which car to buy? To the extent it was the latter, when the program finally ends for good, will consumers make other choices and the factories have to retool, involving layoffs, in order to meet demand for these other choices? Will these layoffs and the cost of retooling mean the net economic effect of this program will be negative?
In a broader economic context, if this program did lead to increased new car sales, then the money spent on new cars was not spent elsewhere, as it would have been without the program, so when we balance the positive effect on the auto industry of increased new car sales against the negative effects on those segments of the economy consumer spending was diverted from by this program, was the net economic effect positive or negative?
The program is popular so it has political value, but it is unclear that it had a net positive effect on our economy. As for getting more efficient cars on the road, that would have happened anyway as people naturally traded in their older cars for newer ones, so this program may have speeded up this process, but by how much and at what cost? To the extent the purpose was to stimulate the economy, a tax rebate would have done at least as well and without distorting markets in ways that may lead to higher costs for retooling factories and more layoffs when the program ends.
I was messing.
~EZ
