Friday, August 07, 2009

Scam for clunkers

At best this could be called an economic placebo. The government takes action, and this provides reassurance to the segments of the population that thinks the government needs to do something. The same effect could be achieved at a lower cost if officials keep putting positive spin on economic news. Human psychology is the most important factor in economics.

Some more thoughts:
1. Because of the complex rules of the program, it seems likely that some car dealers will be denied reimbursement by the government and end up taking a loss on sales. I will have no sympathy for them. Sleep with dogs, wake up with fleas. Sleep with the government, wake up with paperwork to fill out.
2. "Regressive" and "progressive" are used to describe taxes that directly impact the poor and wealthy, respectively. It's about time that they be used to describe government programs as well. CARS is a regressive program that disproportionately helps upper middle class car buyers. Most people who make less than $25K a year will not be able to take advantage of this program.
3. Watch for people starting to hoard "clunkers" if they think that the program will be repeated or extended.

2 comments:

Bob G. said...

Rob:
People have hoarded clunkers for at least TEN YEARS on the S/E side of the city....we call them BOOMCARS!
(and I haven't seen ONE of them traded in for a more "fuel-efficient" model since the program started.
(and probably never will)

;)

Tim Zank said...

All this program did (or is doing) is wasting our money in circular fashion and robbing dealers of future traffic and sales.
I spent over 20 years running franchise car dealerships and whenever the factory over-incentivized the product to pull a quarter out of it's ass, the next quarter would plummet. We got used to it but it doesn't last forever, as we've all seen now.