Most Americans do not own cars or trucks worth $24,000, yet that’s how much American taxpayers spent to subsidize each new vehicle sold because of the “Cash for Clunkers” program, according to auto industry analysts at Edmunds.com.
As many Clunkers critics predicted, people who were planning to buy a new car or truck in the next few months merely moved up their purchase to take advantage of the taxpayer-funded rebates. That has reduced sales that otherwise would be occurring now.
New auto sales plunged after the expiration of the Clunkers program in late August.
Auto sales appear to have recovered in October, but Edmunds says October sales would have been even stronger if not for the Clunkers program.
Edmunds reports only about 125,000 of the nearly 700,000 vehicles sold through “Clunkers” were sold because of the program.
More than 565,000 of the Clunkers-eligible vehicles would have been sold without the program rebates, which averaged about $4,000 per vehicle and maxed out at $4,500.
The average subsidy for each vehicle sold because of the Clunkers program comes out to about $24,000.
That’s enough to cover the entire cost of a new Ford Mustang, Toyota Prius, Honda CR-V, Dodge Charger, Chevy Malibu, Jeep Wrangler, or Nissan Altima, to name just a few of the scores of foreign and domestic vehicle models that can be purchased for $24,000 or less.
The Obama administration attributes great things to the Clunkers program.
The auto sales spike boosted reported U.S. gross domestic product for the quarter. GDP increased more than 3 percent, but government figures say auto sales accounted for about 1.7 points of that.
The upshot is an artificial spike in auto sales and a corresponding artificial spike in GDP growth. So for the $3 billion we spent on Cash for Clunkers, the net result is—nothing.
Actually, it’s worse than nothing. The $3 billion was borrowed, which means we will be paying for it for years to come, putting the country even deeper into hock with China and other foreign lenders.
As if to demonstrate their imperviousness to experience, the president and federal lawmakers have already decided to foist a similar program on us, this one subsidizing purchases of Energy Star-rated home appliances including dishwashers, refrigerators, furnaces, and air conditioners.
By the end of 2009, consumers will be able to receive $50 to $200 in rebates, depending on the appliances purchased.
As with Cash for Clunkers, we can expect the true per-appliance cost of the program to be vastly greater than advertised, as appliance buyers do the same thing car buyers did in Cash for Clunkers: move up purchases they were planning to make anyway to take advantage of the giveaway of taxpayers’ money.
Steve Stanek (sstanek@heartland.org) is a research fellow at The Heartland Institute in Chicago.
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