Free Markets, Free People

Law Of Unintended Consequences Meets “Cash For Clunkers”

Or in the words of almost any economist who knows his business – “I told you so.”

Essentially what has happened is precisely what most of them said would happen – the program, Cash For Clunkers, did nothing more than steal from future sales.

To paraphrase the Reverend Wright – the clunkers are coming home to roost: reports that “September’s light-vehicle sales rate will fall to 8.8 million units . . . the lowest rate in nearly 28 years, tying the worst demand on record. After the cash-for-clunkers program boosted August sales to their first year-over-year increase since October 2007, demand has plunged. In at least the last 33 years, the U.S. seasonally adjusted annual rate has only dropped as low as 8.8 million units once — in December 1981 — with records stretching back to January 1976.”

But fear not – Washington has learned its lesson:

Now NHTSA says that, despite burdening manufacturers with $60 billion in new costs, its new 35.5 mpg fuel mandate will stimulate the economy by boosting auto sales by 65,480 vehicles through 2016 because Washington “expects stronger consumer demand for fuel-efficient models.”

Yup, DC knows economics and it certainly knows the consumer’s mind doesn’t it? Centralized planning has always driven demand. Yessireee. That’s why the Soviet Union is such an economic powerhouse today.



6 Responses to Law Of Unintended Consequences Meets “Cash For Clunkers”

  • Can’t you imagine what these 2016 35 mpg wonders ( constructed of paper mache, held together with paste glue) will look like. Better buy a pre 2016
    real car–start saving those pennies.

    • I don’t know what the fuel-efficient models will look like in 2016. I suspect that they’ll be difficult to find in a sea of imports.

  • The cash for clunkers wasn’t as much about stimulating sales as it was about taking a glut of ’09s off of dealers hands, all dealerships and not just those with troubled companies.

    Model years with cars aren’t as clear cut as they use to be, but in buyer’s minds, right now is an expectation of seeing 2010 models instead of 2009 models. An 2009 and 2010 could be made 2 months apart but you have to offer a discount into the thousands to sell the 2009.

    Dealers would would gladly exchange dumping their 2009s and worry about managing inventories better with 2010 since that model year just started.

  • You know, my Town Car looks good, is very comfortable, gets 26 highway, and is paid for. Think I’ll just keep it forever.

  • 60 billion divided by 65,480 comes to $916,310 in costs per additional vehicle sold.

    But that’s only meaningful if the pseudo-precise figure 65,480 has any basis in reality at all.