Nov 1, 2009

"Cash for Clunkers was basically a lemon"

CEO Jeremy Anwyl is defending his company's claim that the Cash for Clunkers program was basically a lemon, saying a recent report simply reiterated what's well known in the car industry: Incentive programs are "eyewateringly expensive."

After taking on Fox News and the US Chamber of Commerce as part of a new media strategy aimed at perceived political opponents, the White House turned its blog on Edmunds' critical report of the $3 billion Cash for Clunkers program.

According to Edmunds, only 125,000 of the 690,000 cars sold during the taxpayer-funded promotion were sales inspired by the program as opposed to those that would have happened anyway.

Edmunds then divided that number by the total price tag and voilà: Each car purchased cost the American taxpayer $24,000.

If you're so inclined, here are the links: CEA and Edmunds.com ...Edmunds.com can hardly be characterized as an opposition front. In fact, Anwyl says, most of its employees are Obama supporters.

(By the way, one journalist has apologized for comparing White House media strategy to Nixon's "enemies list".)

Update 11/02


businessinsider.com - If anyone mentions the just-released 3.5% U.S. third
quarter GDP growth, just throw this chart in their face. Cash for Clunkers
clearly distorted the U.S. economic figures in an unsustainable fashion.


According to the Bureau of Economic Analysis (BEA), motor vehicle output
spiked a seasonally-adjusted 157.6% quarter on quarter. This is completely
unprecedented. Vehicle output is clearly going off a cliff next quarter. The
question will be how low can the blue line below go.


To put this into GDP terms, according to the BEA the spike you see below
added 1.66% to the U.S. GDP growth figure reported. Thus without it, GDP growth
would have been only 1.89% (3.5% - 1.66%) in Q3.


Now imagine if next quarter the blue line below goes down into negative
territory as it did just two quarters ago.


Next quarter, not only are we unlikely to get Q3's boost, but motor vehicle
output data could subtract from GDP as well.


So watch out for the cliff...