"Cash for Clunkers" officially ended on Monday evening, so what did Americans buy with nearly $3 billion? Lots of foreign cars.
Here's the final numbers on the program, which cost a total of $2.9 billion (so how long will it be before a political is tauting that it came in "under budget", despite the fact that it actually cost 300% what the initial budget was?), courtesy of the Washington Post. The most interesting thing is that the top 10 models traded in as "clunkers" are all American-made cars, while only two of the top ten models purchased through the program were born in the USA. Those two? The Ford Focus (#4) and the Ford Escape (#10).
Toyota made out the best from the program, accounting for nearly 20 percent of the market during August (compared to just 17 percent from January to July of this year), while Honda saw their market share bump up from 11 percent to 13 percent.
As for gas mileage, the average car traded in got only 15.8 miles per gallon, while the average car purchased gets 24.9 miles per gallon. Even when you consider the fact that new cars always get better mileage (even if they are the exact same model), that increase is higher than I expected.
So if the program was intended to get gas guzzlers off the road (at least a fraction of them), and create insta-demand in the new car market, label this one a success.
However, if you want to look at this in any deeper, more meaningful, and analytic way.....not so fast. Already the car dealerships are concerned about the negative impact there will be on new car sales over the winter and into next year. Not to mention the impact that destroying all those cars will have on the used car market, which is going to see a significant drop in supply.
So 'Cash for Clunkers' might have helped the environment by the tiniest of tiny bits, and temporarily stimulated one sector of the economy, but it may have done so at the expense of both future supply and future demand.
I think Jeremy Anwyl of Edmunds.com, a automotive research group, sums it up well in the Washington Post:
"'Cash for Clunkers' created a nice little blip," he said. "We'll look back and say, 'Nice party, but the hangover is awful.' "
Showing posts with label Cash for Clunkers. Show all posts
Showing posts with label Cash for Clunkers. Show all posts
Wednesday, August 26, 2009
Tuesday, August 11, 2009
Clunkers, Part II
I get SO MANY comments on this blog that sometimes it is difficult to find time to acknowledge all of them, even the very good ones. But, due to a general lack of anything else to discuss this evening, I'm going to temporarily yield the floor to one of the great plethora of comments that I have received about my post on the "Cash for Clunkers" program about a week ago:
According to the carbon footprint calculator at terrapass.com (look, I cite figures. Unlike your source article, where the per capita income comes out of nowhere), a 1999 Ford Explorer, a popular car in its heyday that I'm sure is seeing some trading in right now, emits 9.17 tons of CO2 each year; upgrading to a 2009 Ford Focus cuts down to 5.25 tons of CO2 per year. As long as a driver keeps their car for TWO YEARS, they have successfully offset the CO2 output figure you cite.
These numbers assume putting 15,000 miles per year on to the car, which seems an average figure. Terrapass also informs us, passed on the fuel efficiency standards of these models, that the Explorer would use 938 gallons of fuel per year while the new Focus would use 536. That saves 400 gallons of gas per year for the drivers of those new cars, which at an average of $2.55 per gallon (EIA statistic), saves those families $1020 each year. This now means more money for those families could choose to put into other sects of the economy, while also reducing oil consumption by 32,000,000 (32 million) gallons per year, considering that the same article you cited last says 80,000 cars have been upgraded in this program (which sad to say, apparently offsets less than one day of our nation's oil consumption).
Well, I don't think there was any need to get snarky with the "I cite real figures" thing, but I'll let that go for now.
She makes a valid argument in favor of why driving a Ford Focus is better for the environment than driving a Ford Explorer, but I don't think that comes as a real shock to anyone. The problem is, with the way the program is structured, the people who are trading in SUVs with really bad gas mileage, are not generally driving away in Ford Focuses (Foci??).
If you trade in a car that gets less than 18 MPGs (which is the only way to qualify for the $4,500 discount), you only need to purchase a new vehicle that gets 22 MPG. In other words, they set the bar too low, particularly when you consider that the government requires car manufacturers maintain an average of 25 MPG for all new cars they make. So if you drop off your Hummer H2, you can drive away in something like a Ford F-150 (a mid-sized pickup), which qualifies. Does that make the planet a whole lot better off? Maybe a little. But now you've got to choose between helping the environment a tiny little bit and all the negative outcomes of the program.
My dear reader continues to valiantly defend the "small successes are worth it" approach:
I think this program has brought into clear light the difference fuel efficiency, and other small changes, can make for both the economy and the environment, and for that reason is admirable. To call it a failure is unbelievably harsh, and while I admit there are flaws in the plan, I have not been convinced by a single article or report that this program is anything so cut and dry as either a failure or an outright success.
Ok, so maybe it's not an outright failure, but it's pretty close. Even members of the administration realize this is failing. From today's Washington Post:
“What we ended up with,” said one senior Obama administration official, who would not speak on the record because he was being critical of his own administration’s environmental bona fides, “is a program in which you trade in old clunkers for new clunkers.” Less discussed is the second critique of the program: It rewards drivers who chose to buy gas guzzlers a few years back, but not those who spent more to buy fuel-sippers.
I think that second point has been seriously understated. It's like rewarding a shoplifter with a $100 free shopping spree and hoping they stop stealing from you after that.
Now allow me to add another critique. I was speaking to a car dealer here in Rochester the other day (look, I use real sources too), and he brought up this point, which I hadn't though of before:
Assume that you are an individual living on low income, or even fixed income. There are certainly enough people like that in this country to consider them an important part of population. Now, you, as one of those people, would really love to get a new car, but even with the $4,500 rebate, you just can't scrape together enough money to afford a brand new car. So you will go out and try to find a reliable model with more than 100,000 miles on it that costs somewhere under two grand. According to this dealer I was speaking to, a pretty significant portion of the used car business is in these "heavily used but pretty cheap" cars.
Well, thanks to "Cash for Clunkers", much of the supply in that sector of the market has been destroyed. People that would normally trade their cars in years from now and buy a new one (allowing that old car to be sold off to someone with low or fixed income at a low price) are trading their cars in right now. The government mandates that all cars traded in through the program must be crushed, so they can't be resold. This means today's "clunkers" will not get the chance to be tomorrow's cheap bargains.
This will at least for a few years disproportionately hurt the poorest members of society, the ones who can't take advantage of the "Clunkers" program right now because it only covers new cars and won't be able to buy a old, cheap, crappy car in the future because there will be so few of them left.
So now the liberals have to choose: the environment or the poor people?
What you're left with a program that does not create new demand (it just shifts future demand forward), destroys the future of an important segment of the used car market, and rewards the people who have been causing the "problem" in the first place. All in the name of a tiny reduction in gasoline consumption, slightly better emission statistics, and a little bump in consumer confidence.
Like Third Eye Blind sings in their newest single: "half-measures are all half-assed" (funny, they wrote that as a critique of Bush....but it works for government in general)
According to the carbon footprint calculator at terrapass.com (look, I cite figures. Unlike your source article, where the per capita income comes out of nowhere), a 1999 Ford Explorer, a popular car in its heyday that I'm sure is seeing some trading in right now, emits 9.17 tons of CO2 each year; upgrading to a 2009 Ford Focus cuts down to 5.25 tons of CO2 per year. As long as a driver keeps their car for TWO YEARS, they have successfully offset the CO2 output figure you cite.
These numbers assume putting 15,000 miles per year on to the car, which seems an average figure. Terrapass also informs us, passed on the fuel efficiency standards of these models, that the Explorer would use 938 gallons of fuel per year while the new Focus would use 536. That saves 400 gallons of gas per year for the drivers of those new cars, which at an average of $2.55 per gallon (EIA statistic), saves those families $1020 each year. This now means more money for those families could choose to put into other sects of the economy, while also reducing oil consumption by 32,000,000 (32 million) gallons per year, considering that the same article you cited last says 80,000 cars have been upgraded in this program (which sad to say, apparently offsets less than one day of our nation's oil consumption).
Well, I don't think there was any need to get snarky with the "I cite real figures" thing, but I'll let that go for now.
She makes a valid argument in favor of why driving a Ford Focus is better for the environment than driving a Ford Explorer, but I don't think that comes as a real shock to anyone. The problem is, with the way the program is structured, the people who are trading in SUVs with really bad gas mileage, are not generally driving away in Ford Focuses (Foci??).
If you trade in a car that gets less than 18 MPGs (which is the only way to qualify for the $4,500 discount), you only need to purchase a new vehicle that gets 22 MPG. In other words, they set the bar too low, particularly when you consider that the government requires car manufacturers maintain an average of 25 MPG for all new cars they make. So if you drop off your Hummer H2, you can drive away in something like a Ford F-150 (a mid-sized pickup), which qualifies. Does that make the planet a whole lot better off? Maybe a little. But now you've got to choose between helping the environment a tiny little bit and all the negative outcomes of the program.
My dear reader continues to valiantly defend the "small successes are worth it" approach:
I think this program has brought into clear light the difference fuel efficiency, and other small changes, can make for both the economy and the environment, and for that reason is admirable. To call it a failure is unbelievably harsh, and while I admit there are flaws in the plan, I have not been convinced by a single article or report that this program is anything so cut and dry as either a failure or an outright success.
Ok, so maybe it's not an outright failure, but it's pretty close. Even members of the administration realize this is failing. From today's Washington Post:
“What we ended up with,” said one senior Obama administration official, who would not speak on the record because he was being critical of his own administration’s environmental bona fides, “is a program in which you trade in old clunkers for new clunkers.” Less discussed is the second critique of the program: It rewards drivers who chose to buy gas guzzlers a few years back, but not those who spent more to buy fuel-sippers.
I think that second point has been seriously understated. It's like rewarding a shoplifter with a $100 free shopping spree and hoping they stop stealing from you after that.
Now allow me to add another critique. I was speaking to a car dealer here in Rochester the other day (look, I use real sources too), and he brought up this point, which I hadn't though of before:
Assume that you are an individual living on low income, or even fixed income. There are certainly enough people like that in this country to consider them an important part of population. Now, you, as one of those people, would really love to get a new car, but even with the $4,500 rebate, you just can't scrape together enough money to afford a brand new car. So you will go out and try to find a reliable model with more than 100,000 miles on it that costs somewhere under two grand. According to this dealer I was speaking to, a pretty significant portion of the used car business is in these "heavily used but pretty cheap" cars.
Well, thanks to "Cash for Clunkers", much of the supply in that sector of the market has been destroyed. People that would normally trade their cars in years from now and buy a new one (allowing that old car to be sold off to someone with low or fixed income at a low price) are trading their cars in right now. The government mandates that all cars traded in through the program must be crushed, so they can't be resold. This means today's "clunkers" will not get the chance to be tomorrow's cheap bargains.
This will at least for a few years disproportionately hurt the poorest members of society, the ones who can't take advantage of the "Clunkers" program right now because it only covers new cars and won't be able to buy a old, cheap, crappy car in the future because there will be so few of them left.
So now the liberals have to choose: the environment or the poor people?
What you're left with a program that does not create new demand (it just shifts future demand forward), destroys the future of an important segment of the used car market, and rewards the people who have been causing the "problem" in the first place. All in the name of a tiny reduction in gasoline consumption, slightly better emission statistics, and a little bump in consumer confidence.
Like Third Eye Blind sings in their newest single: "half-measures are all half-assed" (funny, they wrote that as a critique of Bush....but it works for government in general)
Wednesday, August 5, 2009
Why "Clunkers" Failed
Enjoyable and informative article from Denver Post columnist David Harsanyi about the reasons why "Cash for Clunkers" is a failure, no matter how much Congress wants to make it look like a success. I'll pull out the best parts, beginning with this summery of the program:
"Here's an idea: Let's give $50,000 to anyone looking to upgrade to a brand-spanking-new, environmentally friendly home. All we ask in return is that you burn your previous residence into a heap of smoldering cinder."
There are two reasons why this bill was passed (and re-upped by the government this week): environmental benefits and economic stimulus. Harsanyi argues that it has failed on both fronts:
"Now, some of you radicals may have an ideological dilemma with a government handing out thousands of dollars to citizens making an average of $57,000 a year so they can upgrade their perfectly serviceable vehicles. Turns out, though, that by nearly any criterion, including the ones offered up by President Barack Obama, this populist experiment is an unmitigated fiasco.
To begin with, building a new car consumes energy. It is estimated that 6.7 tons of carbon are emitted in the process. So a driver who participates in the "cash for clunkers" program would need to make up for that wickedness."
So that covers the supposed environmental benefits. Here's why it does nothing to help the economy:
"As an economic stimulus, the plan is equally impotent. As James Pethokoukis, a columnist at Reuters, succinctly explained, 'The program gets much of its juice via stealing car sales from the near future rather than generating additional demand'."
The point of a stimulus should be to create new demand, not to move existing demand around to score political points."
The only potential benefit to shifting that demand forward would be to help the ailing American car companies right now (of course they will be hurt by the lack of demand in the near future, but I can buy the validity of the argument that they needed those purchases immediately to survive), but over 50% of the cars being purchased through the program are foreign. Additionally, even though the Ford Focus is the top-selling car purchased through the program, numbers two through five are made by either Toyota or Honda.
"Here's an idea: Let's give $50,000 to anyone looking to upgrade to a brand-spanking-new, environmentally friendly home. All we ask in return is that you burn your previous residence into a heap of smoldering cinder."
There are two reasons why this bill was passed (and re-upped by the government this week): environmental benefits and economic stimulus. Harsanyi argues that it has failed on both fronts:
"Now, some of you radicals may have an ideological dilemma with a government handing out thousands of dollars to citizens making an average of $57,000 a year so they can upgrade their perfectly serviceable vehicles. Turns out, though, that by nearly any criterion, including the ones offered up by President Barack Obama, this populist experiment is an unmitigated fiasco.
To begin with, building a new car consumes energy. It is estimated that 6.7 tons of carbon are emitted in the process. So a driver who participates in the "cash for clunkers" program would need to make up for that wickedness."
So that covers the supposed environmental benefits. Here's why it does nothing to help the economy:
"As an economic stimulus, the plan is equally impotent. As James Pethokoukis, a columnist at Reuters, succinctly explained, 'The program gets much of its juice via stealing car sales from the near future rather than generating additional demand'."
The point of a stimulus should be to create new demand, not to move existing demand around to score political points."
The only potential benefit to shifting that demand forward would be to help the ailing American car companies right now (of course they will be hurt by the lack of demand in the near future, but I can buy the validity of the argument that they needed those purchases immediately to survive), but over 50% of the cars being purchased through the program are foreign. Additionally, even though the Ford Focus is the top-selling car purchased through the program, numbers two through five are made by either Toyota or Honda.
Tuesday, August 4, 2009
Omnibus
I haven't done much posting on here for the past few days, and since I updated you on my personal life below, here's some other important information that you might have missed during the past few days:
Jacob Sullum, a blogger for Reason, is apparently a beer snob - and I couldn't agree with him more. Really, Mr. President? Bud Light? What makes it even worse is that he obviously made that choice (or, more correctly, his image consultants did) because you want to look more appealing to the average middle class beer-drinking America: "Look, Obama isn't an Ivy League intellectual snob, he drinks crappy beer just like you!" The sad part is that they believe Joe the-middle-class-soon-to-be-out-of-work-beer-drinking-average-dude is more likely to say "I like Obama because he drinks Bud Light like me" than "I hate Obama's because he's raising taxes", and they are probably right.
***
The "Cash for Clunkers" program is the definition of a successful failure, and even if you knew nothing about it, I bet you could guess that only a government idea could become the epitome of an oxy-moron. I guess no one in Washington bothered to think that giving people free money for a new car would get an overwhelming response. Now they are all acting surprised that so many people took advantage of the offer, and riding in to rescue a program that was a mistake in the first place. Remind me again - why does someone else having a crappy car give them a right to my tax money so they can get a better car? Did they pay help pay for my car? I don't remember that happening.
***
Interesting fact about some new polls (and for the record, polls like this are crazy this far in advance of the next Presidential election): Mitt Romney is seeing both his "favorable" and "unfavorable" numbers decline. In other words, fewer people like him....and fewer people dislike him. How does that happen? Are people just completely apathetic about him? Maybe that's good for him, since every member of the GOP who gets attention is getting it for the wrong reasons (paging Jindal....Stanford....Palin....)
***
Arlen Specter, also known as that Senator from Pennsylvania who flipped parties after the Democrats took control of everything in January, got loudly booed this weekend in Philadelphia. I can't wait to help kick him out of office next November. I'd vote for just about anyone over Specter at this point.
***
Brand New is set to release a new album - so does that make Emo kids happy? or does it make them sadder? Does it make them happy to be feeling sadder, or sadder to be feeling happy? Will I ever understand Emo kids? Maybe the band is growing up a little, because there are 11 tracks on the album and only 19 words (total) in the 11 names. A few years ago, 19 words would get Brand New through about two song titles, if that. This is the band that has given us such verbose gems as:
"Good to Know That if I Ever Need Attention All I Have to Do is Die" (that's 16 words right there)
"Okay, I Believe You, But My Tommy Gun Don't"
"I Will Play My Game Beneath the Spin Light"
Though I must give a little credit. I've been busting on Brand New for a long time (and mostly they deserve it) but "Play Crack the Sky" is a really good, haunting song.
***
The Dallas Cowboy's new stadium (which cost well over $1 Billion to build) will have luxury boxes where you can order pizza. The catch? That round slab of dough, cheese, and sauce (no toppings) will cost you $90. In my opinion, anyone who is paying that much for a pizza needs to seriously re-examine their lives.
Of course, to even rent one of those luxury boxes you have to pay $800,000 a year (and that doesn't actually include tickets to games), so maybe $90 for a pizza, $66 for a 12-pack of beer, and $22 for four Red Bulls is just small change. All I know is that if I had $800K to spend, I wouldn't use it to go see the Dallas Cowboys.
***
Cab drivers in New York City are pretty much openly ignoring the cell phone use ban. This isn't much of a surprise though, since they already ignore most other traffic laws.
***
This is pretty cool (even if it did come from the New York Times), a chart showing what people are doing at any given time during the day. It also makes a pretty background for your desktop.
***
Let the countdown begin - exactly 2 weeks until Third Eye Blind's new album is finally released.
Jacob Sullum, a blogger for Reason, is apparently a beer snob - and I couldn't agree with him more. Really, Mr. President? Bud Light? What makes it even worse is that he obviously made that choice (or, more correctly, his image consultants did) because you want to look more appealing to the average middle class beer-drinking America: "Look, Obama isn't an Ivy League intellectual snob, he drinks crappy beer just like you!" The sad part is that they believe Joe the-middle-class-soon-to-be-out-of-work-beer-drinking-average-dude is more likely to say "I like Obama because he drinks Bud Light like me" than "I hate Obama's because he's raising taxes", and they are probably right.
***
The "Cash for Clunkers" program is the definition of a successful failure, and even if you knew nothing about it, I bet you could guess that only a government idea could become the epitome of an oxy-moron. I guess no one in Washington bothered to think that giving people free money for a new car would get an overwhelming response. Now they are all acting surprised that so many people took advantage of the offer, and riding in to rescue a program that was a mistake in the first place. Remind me again - why does someone else having a crappy car give them a right to my tax money so they can get a better car? Did they pay help pay for my car? I don't remember that happening.
***
Interesting fact about some new polls (and for the record, polls like this are crazy this far in advance of the next Presidential election): Mitt Romney is seeing both his "favorable" and "unfavorable" numbers decline. In other words, fewer people like him....and fewer people dislike him. How does that happen? Are people just completely apathetic about him? Maybe that's good for him, since every member of the GOP who gets attention is getting it for the wrong reasons (paging Jindal....Stanford....Palin....)
***
Arlen Specter, also known as that Senator from Pennsylvania who flipped parties after the Democrats took control of everything in January, got loudly booed this weekend in Philadelphia. I can't wait to help kick him out of office next November. I'd vote for just about anyone over Specter at this point.
***
Brand New is set to release a new album - so does that make Emo kids happy? or does it make them sadder? Does it make them happy to be feeling sadder, or sadder to be feeling happy? Will I ever understand Emo kids? Maybe the band is growing up a little, because there are 11 tracks on the album and only 19 words (total) in the 11 names. A few years ago, 19 words would get Brand New through about two song titles, if that. This is the band that has given us such verbose gems as:
"Good to Know That if I Ever Need Attention All I Have to Do is Die" (that's 16 words right there)
"Okay, I Believe You, But My Tommy Gun Don't"
"I Will Play My Game Beneath the Spin Light"
Though I must give a little credit. I've been busting on Brand New for a long time (and mostly they deserve it) but "Play Crack the Sky" is a really good, haunting song.
***
The Dallas Cowboy's new stadium (which cost well over $1 Billion to build) will have luxury boxes where you can order pizza. The catch? That round slab of dough, cheese, and sauce (no toppings) will cost you $90. In my opinion, anyone who is paying that much for a pizza needs to seriously re-examine their lives.
Of course, to even rent one of those luxury boxes you have to pay $800,000 a year (and that doesn't actually include tickets to games), so maybe $90 for a pizza, $66 for a 12-pack of beer, and $22 for four Red Bulls is just small change. All I know is that if I had $800K to spend, I wouldn't use it to go see the Dallas Cowboys.
***
Cab drivers in New York City are pretty much openly ignoring the cell phone use ban. This isn't much of a surprise though, since they already ignore most other traffic laws.
***
This is pretty cool (even if it did come from the New York Times), a chart showing what people are doing at any given time during the day. It also makes a pretty background for your desktop.
***
Let the countdown begin - exactly 2 weeks until Third Eye Blind's new album is finally released.
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