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Anon. 10:09

So we put the wheel of the "Ship of State" into the hands of the Cabin Boy and his buddies? Talk abut a recipe for disaster. Kind of reminds me of the McCain-Palin ticket and as it turned out, the Bush-Cheney ticket.


"This is a classical argument against using government spending for counter cyclical purposes, but seems to have been forgotten during this recession."

Forgotten? Yeah right. They knew it but could not in good conscience execute a non-Keynsian stimulus plan because the current administration believes government solves problems.


Anon, 3:50

Really ...? I suppose the Supreme Court has been a supreme failure, the Federal Courts a failure, the Congress has been a failure, the Executive a failure, the Army-Navy-Air Force- Marines all failures, the State Department a failure, the Treasury a failure, the Federal Reserve a failure, the CIA a failure, the Bureau of the Mint a failure, and all of the other Bureaus and Agencies all failures.

We might as well shut everything down and let the Anarchists take over. Hobbes you were right, there are those who wish to return to that primordial state where life is once again, nasty brutish and short.


It is hopeful but far from certain that the recession is over or turning the corner. It is certainly not too late to have a good reason to stimulate demand for durable goods. The psychological benefit of new-car purchases is significant for consumer confidence, because Americans love cars. This program's simplicity made it very easy to sell to consumers, as shown by its enormous popularity. These sales at this time will have a greater stimulative effect than they would have had next year, if demand has risen by then, as it should. A month or two ago it seemed like very little could stimulate auto purchases. Three billion is not very much money relative to the ARRA program. Transfer payments are also effective stimulus if they take money out of savings and into business (unlike Keynsian deficit spending).

On the environmental side, it would have been better to have a lower ceiling on the MPG of the trade-in, as shown by how willing people were to trade in their 19 MPG cars. But that was hard to predict.

A good program, a few glitches notwithstanding. You guys need to loosen up and take the larger view.


The cash for clunkers program is a disaster because:

First, it caused the car makers to eat their seed corn. The cars sold this year won't be sold next year. What then?

Second, it is a subsidy for the Japanese. Most "clunkers" were American made, while most cars bought under the program were foreign. You can take it from there.

Third, the program destroyed a fleet of older cars that would have been driven in the years to come by the poor and the young who can't afford new cars.

Fourth, a new car puchase is an emotional as well as an economic process, so it is likely that many buyers under the "clunker" program bought without thinking things through, and will find themselves strapped for the money necessary to keep up the payments. A fortiori so as the unemployment figures rise as they continue to do. Look for an increase in repossessions in the near future.


Anonymous at August 26, 2009 11:44 PM, you claim that an order of magnitude more oil/energy is used to make a new car than used to drive one. That seems suspicious to me. Yes, it takes a significant amount of energy to manufacture a car, but it take a lot more to transport that vehicle 200,000 miles during its lifetime.

Several studies have found that less than 15% of a car's lifetime energy use comes from manufacturing and disposal combined, with nearly 90% of all energy used in the motor industry went to vehicle operation.

source: http://www.pacinst.org/topics/integrity_of_science/case_studies/hummer_vs_prius.pdf

No doubt, it will take some time (years?) to reach the point where the new car is using less net energy than the clunker, but that day *will* come!

Energy scientists are not dumb: they do these types of calculations every day.



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How long it would last?
Such that the U.S. has International obligations to reduce its carbon emissions, this is accomplished by removing old worn out transportation vehicles from the roads which are one of the largest producers of the Nation's Carbon footprint.

Mikes Growth


For those who do not accept the notion that federal payments help the economy, please explain this series of events:

There have been 9 recessions in the past 60 years. Every one of them was preceded by years of reduced deficit growth. Every one of them was cured with increased deficit growth.

Since this surely cannot be a coincidence, the lesson is clear. Federal spending adds money to the economy, and a growing economy requires a growing supply of money.

To a small degree, cash-for-clunkers adds money to the economy. And lest you believe we now are out of economic trouble, continued recovery will require continued government spending.

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I've read this critique of the program elsewhere, and I don't understand the basis for the assumption that drivers would drive their new non-clunkers more than their clunkers? Where is the evidence for this assumption? If it were removed from the analysis, wouldn't that show the program to be much more successful? Unless and until I see this proof, I'm not going to condemn this program.


A certain base of purchases would have been made over this time period. The cost to stimulate the marginal buyer to advance their purchase was about $20,000 per vehicle. The environmental benefits are so insignificant as to be unmeasurable in our atmosphere. complete govt insanity.


Great, well-thought out position.
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"Readers continue to wait patiently for any engineers or mathematicians to post comments on this subject."

Aerospace engineer here; wanted to be sure you were let out of your misery. For the record, I agree with the blog post that the cash for clunkers program was a really bad idea. GM and Chrysler should not have been bailed out with Fed money, people's car purchases should not have been subsidized with Fed money, and people's lives shouldn't be subsidized with Fed money either. Stand on your own two feet people.

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Becker and Posner persuasively explain why the Cash For Clunkers program is idiotic public policy. To be sure, however, the Cash For Clunkers idea has some symbolic value. Why not combine that symbolic aspect of Cash For Clunkers with government spending of taxpayer money in furtherance of a truly worthy aim? That is, apply Cash For Clunkers principles to send Pelosi and Waxman and their legislative allies to the political junkyard.

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A popular rumor holds that our old household appliances will be next. Another sez the TARP and similar program $$$ held back and being repaid is already earmarked to take the Too-Big-to-Fail banks off their $ Multi-Billions in bad commercial real estate exposures. And the FDIC, of course, needs $ Hundreds of Billions if it's going to close 200 more regional & local banks and protect depositors to $250K per depositor per institution. Congress giveth and Congress taketh away. It just waits to drop the other shoe. All considered, it's a miracle we're still on this side of the grass.

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