With all the stories about the massive failure that is Obamacare, especially the exchanges, that are finally out and about, it is easy to forget the earlier policy and fiscal failures of the Obama administration. Fortunately, the Brookings Institute didn’t forget about the “Cash for Clunkers” program. In a report released last week, they found that the $2.85 billion, 2-month program essentially merely time-shifted the purchase of new vehicles forward a few months (H/T – Kevin Binversie). From the conclusion of the research paper:
The primary motivation for the CARS program was to provide temporary stimulus to counter the economic contraction that was occurring at that time, while also reducing fuel consumption and thus emissions. The evidence suggests that the program did indeed incentivize the sale of more fuel efficient vehicles by pulling sales forward from the near-term future. This resulted in a small and short-lived increase in production, GDP, and job creation. However, the implied cost per job created was much higher than alternative fiscal stimulus policies. Further, these small stimulus effects do not account for the depletion of the capital stock that resulted from the destruction of used vehicles….
The CARS program led to a slight improvement in fuel economy and some reduction in carbon emissions. The cost per ton of carbon dioxide reduced from the program suggests that the program was not a cost-effective way to reduce emissions, although was more cost effective than some other environmental policies, such as the tax subsidy for electric vehicles or the tax credit for ethanol.
The pull-forward component of “Cash for Clunkers” was explored through two separate metrics – the effects of the spike in sales in July and August 2009 on sales in the following months, and a year-long comparison of sales, between July 2009 and June 2010, in locales with a high number of “clunker”-eligible vehicles and sales in locales with a low number of “clunker”-eligible vehicles. Sales dropped massively in September 2009 after “Cash for Clunkers” ended, and didn’t return to the longer-term trendline until the end of 2009. Meanwhile, there was no appreciable difference in total sales between high-“clunker”-eligible locales and low-“clunker”-eligible locales.
Brookings estimated that a bit over 2,000 jobs were, to use an old Obama phrase, saved or created with that $2.85 billion, for a per-job saved/created cost of $1.4 million. It did result in some overtime for the manufacturing employees as they hustled to restock depleted car lots, but given the evidence that virtually all of the sales would have happened sometime during the 2010 model year, I would tend to discount even that 2,000 “saved or created” claim.
Just how slight of an improvement in fuel economy/carbon dioxide was Cash for Clunkers? Over the 10-12 years’ lifetimes of the vehicles bought, perhaps 2 to 8 days’ worth of gasoline, at current consumption levels, would not be burned, or somewhere between 0.06% and 0.2% savings.
That leads into the other government meddling in the automotive industry, specifically the latest government estimates on how much seizing Governme…er…bailing out General Motors and the United Auto Workers has cost us taxpayers. The Treasury Department has been slowly unloading its holdings, anticipating being fully divested by April 2014, and was down to a 7.3% stake in GM as of September 30. The latest Special Inspector General’s report says that $15 million of the
$50.2 billion $43 billion spent on the GM portion of the auto bailout (the $6.7 billion “loan” given GM upon exiting bankruptcy was “repaid” with other funds gifted to them by the Treasury) was still outstanding, and $9.7 billion of that is already written off as unrecoverable. The bad news – if the Treasury gets the $37.47/share price GM stock closed at yesterday when they finish unloading their shares, they would get a bit less than $3.8 billion on their last claim from GM. That would put the final loss on the GM portion of the auto bailout at a bit more than $12.2 billion.