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"the gains are much higher"
after the carbon, etc environmental costs of building the new car are recovered from lower gas consumption, that takes years.
http://www.economist.com/businessfin...62193&fsrc=rssAug 4th 2009
From Economist.com
Why cash-for-clunkers schemes make sense right now
RARE is the policy innovation that catches on so fast. Indeed, “cash-for-clunkers”, the policy of offering a subsidy to car owners to trade in their old gas-guzzler for a new, less thirsty model, has been adopted this year by so many governments that it is tempting to conclude that it must be a bad idea—and to cheer the Republican senators who this week threatened to kill America’s version of the scheme. After all, any scheme that so many politicians agree on is almost bound to be a clunker itself. Yet given the difficult economic cir stances facing the world, the policy looks like a nice little runner.
The American scheme started out with $1 billion to pay for rebates of $3,500 or $4,500, depending on the difference in fuel efficiency between the old car and the new. It has burned through this in its first month, so on July 31st the House of Representatives voted to give it a further $2 billion before heading off to the beach. This week the Senate has to choose between voting for an identical bill or letting the scheme run out of money. Germany’s €5 billion ($7.2 billion) scrappage scheme has also proved highly popular: within two months of its start, in February, 1.2m motorists had applied, twice the expected number.
The boost in demand that the rebates have brought about is exactly the sort of stimulus that is urgently needed to escape what John Maynard Keynes called a “liquidity trap”. According to his theory, consumers may become so worried about the economy that they cling to as much liquid wealth as possible, cutting their spending sharply and thereby triggering precisely the slump they feared. Moreover, as stimulus policies go, cash-for-clunkers looks to be unusually effective. Admittedly, that is not an especially demanding measure, given that Keynes favoured, if need be, burying money in bottles for people to dig up and spend. Cash-for-clunkers has many benefits beyond simply getting more money passing through the hands of consumers and into aggregate demand.
Tackling the liquidity trap answers one criticism of the scheme—that it is simply pulling forward demand from the future, rather than creating additional demand. In normal times, this criticism would be more powerful. (In France, which offered a scrapping bonus in the mid-1990s, sales fell by 20% in the year after it expired.) However, in a situation where fear could lead consumers to shift to a lower level of demand that could last for years, breaking them out of that negative psychology could mean higher demand tomorrow as well as today. That does not mean that all consumption is good, nor that there should be a return to the unsustainable debt-fuelled consumption that helped cause the current mess, only that it is good to dispel the sort of irrational fear of consumption that Keynes identified as creating liquidity traps.
At some point, a stimulus will no longer be needed, and then the economic priorities will switch to reducing public-sector deficits and ensuring that the efforts to stimulate demand do not lead to high inflation. But that point has not yet been reached. The American economy may have been more or less stabilised, but it is not yet recovering—and no one should want a repeat of the Depression, when stimulus policies were abandoned too early and the economy deteriorated again in 1937.
The scheme has brought about a dramatic improvement in the fortunes of Ford, whose Focus is the most popular new car bought under the scheme. In March it still seemed possible that Ford would go bust, as did Chrysler and General Motors. Its shares traded at less than $2. This week the price was above $11. Likewise, Chrysler, which for a while offered to match the government’s cash-for-clunkers payment on its vehicles, has also enjoyed strong sales, although critics may still fret that a chunk of all that taxpayers' money went to foreign manufacturers like Toyota and Honda, whose sales have also been boosted by the scheme.
It is hard to quantify the environmental benefits of cash-for-clunkers. For a start, the efficiency gains needed to qualify for a grant are fairly small: they can be as low as four miles per gallon. But in practice, the gains are much higher. Many gas-guzzling pickup trucks and sport-utility vehicles, which often do less than ten miles per gallon, are disappearing from the roads. New cars bought under the scheme average 25.4 miles per gallon, compared with 15.8 for the clunkers being traded in. Of course, the results might be even better from an environmental perspective if, as Cameron Sinclair has argued in the Huffington Post, the subsidy was instead used to offer grants for buying bicycles.
EconomistMom, a blogger, argues that it “just seems very wasteful (and somehow ‘heartless’, even with a car) to prematurely end a ‘life’ that still could be valuable to someone—doesn’t it?” That depends of course, on the extent to which that value to someone else is simply the result of a nasty externality, such as the car’s contribution to climate change. It seems likely that there is some economic value to society from putting clunkers out of their misery, even if it is probably not the $4,500 a car the government is spending.
The image of a “clunker bomb” being poured into an old banger’s engine to destroy it, as required under the scheme’s rules, may come to symbolise a greener future for the car industry, much as the image of plug-in electric cars being crushed, as shown in “Who Killed The Electric Car?”, a do entary made in 2006, symbolised the blinkered thinking dominant in Detroit until recently. Certainly, the carmakers’ enthusiasm for the rebate scheme will make it harder for them to oppose long-term, environmentally friendly reforms, such as a proposal to subsidise fuel-efficient car purchases with a tax on sales of the least efficient ones.
Regardless of what happens to cash-for-clunkers, or after it, Jack Hidary of SmartTransportation.org, one of the architects of the scheme, thinks that it has permanently changed the mindset of American consumers, especially coming so soon after last year’s e in the price of oil. Car dealers are now advertising the “total cost of ownership” of vehicles, not just the purchase price, drawing the attention of consumers to differences in fuel efficiency between vehicles and estimating how much it would cost to fill them up with gas each year. This has long been a part of European and Japanese car culture, says Mr Hidary, but until now Americans have never looked beyond the sticker price.
"the gains are much higher"
after the carbon, etc environmental costs of building the new car are recovered from lower gas consumption, that takes years.
Plus the government gets to take over everyone's computers!
That is a good program to help stimulate the country. Where Obama and his crew can gain some more cred from me is if they go to that stimulus bill and re-write it or pull back the funds from all those earmarks. Do like this to help. It's not to late.
Anyone know what they are doing with all those clunkers?
They were originally meant to be crushed, but I think they might be changing it to have the option of just disabling the engine.
Yeah, there's alot of debate on what to do with the cars - as i understand it, engines and transmissions must be disabled, which doesn't make sense to a lot of people who are trying to find and store parts for older vehicles, especially because they are in such high demand...
There should have been a clunkers for clunkers program, where car owners not in the market for a new car could exchange their clunker for a clunker that gets better gas mileage.
how about 'turn in your Chrysler, Pontiac, or any other make vehicle whose wholesale value dropped like a stone when these companies restructered' day...
Obama is proving once again that he's no better than Bush.
http://news.yahoo.com/s/ap/us_cash_f...s_transparency
I thought Obama was going to be different from Bush. Isn't Obama suppose to be better and smarter than Bush? Obama is making Bush out to be a good smart president.
If he's being secretive about a car program, that's better than making up reasons to go to war, occupy and nation build a state. In that respect, Bush made himself out to be a bad, stupid president.
Oh, I get it. If Bush does it, then it's wrong. However, if Obama does it then it's okay. I shouldn't have questioned Obama. He can do no wrong. All Hail Lord Obama.
NPR had a guy on who killed an engine on the air, following the kill-a-clunker requirements.
Drained all the oil, put in some sodium something, plus water. It started immediately, then stopped a few seconds later, and wouldn't start. Engine ruined.
Then a clunker goes to qualified car chippers.
No, you're the one owned. By the left.That's right. Because Obama Won.
The Election.
Obama is the President.
He's our Leader.
Own3d
Jabob pointed out that Obama does not do as he promised. This transparency was a big thing, even for us conservatives.
How many broken promises is he up to now? Seven?
End income tax for seniors making less than $50,000
"Will eliminate all income taxation of seniors making less than $50,000 per year. This will eliminate taxes for 7 million seniors -- saving them an average of $1,400 a year-- and will also mean that 27 million seniors will not need to file an income tax return at all."Allow five days of public comment before signing bills
To reduce bills rushed through Congress and to the president before the public has the opportunity to review them, Obama "will not sign any non-emergency bill without giving the American public an opportunity to review and comment on the White House website for five days."Tougher rules against revolving door for lobbyists and former officials
"No political appointees in an Obama-Biden administration will be permitted to work on regulations or contracts directly and substantially related to their prior employer for two years. And no political appointee will be able to lobby the executive branch after leaving government service during the remainder of the administration."Create a $3,000 tax credit for companies that add jobs
"During 2009 and 2010, existing businesses will receive a $3,000 refundable tax credit for each additional full-time employee hired."Allow penalty-free hardship withdrawals from retirement accounts in 2008 and 2009
"Obama and Biden are calling for legislation that would allow withdrawals of 15% up to $10,000 from retirement accounts without penalty (although subject to the normal taxes). This would apply to withdrawals in 2008 (including retroactively) and 2009."Recognize the Armenian genocide
"Two years ago, I criticized the Secretary of State for the firing of U.S. Ambassador to Armenia, John Evans, after he properly used the term 'genocide' to describe Turkey's slaughter of thousands of Armenians starting in 1915. … as President I will recognize the Armenian Genocide."Negotiate health care reform in public sessions televised on C-SPAN
To achieve health care reform, "I'm going to have all the negotiations around a big table. We'll have doctors and nurses and hospital administrators. Insurance companies, drug companies -- they'll get a seat at the table, they just won't be able to buy every chair. But what we will do is, we'll have the negotiations televised on C-SPAN, so that people can see who is making arguments on behalf of their cons uents, and who are making arguments on behalf of the drug companies or the insurance companies. And so, that approach, I think is what is going to allow people to stay involved in this process."
Last edited by Wild Cobra; 08-05-2009 at 06:25 AM.
So you agree they own you. Just because I live in a Blue state, doesn't mean I submit to them.
Scoreboard!
You like to submit to authoritarianism, don't you...
WC, just expect Obama to not be transparent on anything. I think any knowledge political fans know this now to be the case.
Oh I completely agree. I just can't believe people fell for his bull . Year after year, how many campaign promises are kept?
He had no executive experience for us to see. Hope and change. People fell for his act. I think it's pathetic.
Eh, I still would rather have Obama than Hillary or McCain. Hillary would have been just as willing to support Patriot Act, FISA and the like. And McCain seemed too hotheaded, and frankly, old.
Drama queen. He's done plenty wrong -- nothing as bad as Bush yet though. Relatively speaking, he's just better.
You licked Bush's boots for eight years while claiming to be a conservative and a libertarian. In fact, you are neither.
Fail...
You are flat out wrong. I have stated on several occasions I didn't like some things he did.
No wonder you are seen as the fool you are. Selective memory...
Remember what I said during the elections?
I only preferred Obama for the reason they would all take us down liberalism, including McCain. Just that Obama would be obvious enough about it that people would start realizing democrats for the s they are.
And I don't like some of the things Obama does.
No wonder you are seen as the fool you are. You're a fool.
Why can't Obama lovers, supporters, and worshippers admit when he makes a mistake or when he sucks ass? I voted for Bush in 2004 but I can admit that he sucked some ass as president. Why can't you guys admit that Obama has sucked a little ass as president? The reason why I think Obama is making Bush out to be a good smart president is because of all the mistakes Obama is making. Obama was suppose to save us from the all the damage that evil Bush had made during the last 8 years. So far, Obama has just made it worse. I laughed so hard at Obama last year when he was running for president because he had so many unrealistic promises. The guy hasn't done as president and he needs to be held accountable for it. I know he hasn't been president that long but I don't give a . He wanted to be president. He has to take the good with the bad. He should have known that he wasn't going to fix everything overnight or in a year.
Jacob, if you haven't seen board libs bashing Obama... like, for instance, where I did IN THIS POST... then you're just being blind on purpose.
This does not help the economy.
This helps car sales.
Go look up broken window fallacy.
Or you're just a dumbass.
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