To be sure, these programs provided an incentive to buy cars and houses in the short-term. And indeed, there was a big spike in automobile purchases when the Cash for Clunkers program went into effect last July, allowing consumers to trade in their older-model vehicles for $4,500 rebates toward more fuel-efficient new cars between July 1 and November 1, 2009.
But it is still unclear whether it has had any effect on increasing demand in the long-term. Indeed, by the end of 2009, auto sales plunged 35% right back to where they were before the stimulus was enacted. Today, the automotive industry work force is 30 percent smaller than prerecession, as evidenced in the July jobs report.
And upon thorough examination, it is clear that not only have the Obama administration’s interventions in the auto industry failed to produce the desired long-term results, it is responsible for making the situation worse in the short-term.