Clunker Goals Get Clunker Results – Update

Trashing a vehicle is pretty easy to do.

Of course, if your goal was to to have fun and still be able to drive home at the end of the day, then breaking an axle can only be counted as a very costly mistake. The kind of mistake that makes you wish you could go back in time to when you were just dealing with a truck bogged down in the mud and still had hope for a positive outcome.

On the other hand, if the goal (as some tout) was to capture the public’s imagination and employ people while generating an endless cycle of destruction and construction of vehicles, I can’t help but think that there already is a highly profitable and entertaining method for achieving that goal.

Our government though, had it’s own method of trashing vehicles (Cash for Clunkers in action) for the noble goals of cleaning the environment and stimulating the economy. And while I may find their methods painful and frustrating to watch, to each his/her own. It is results that count in our goal oriented world. So with a little revving of the engines – lets look at some clunker numbers…

According to analysis by  of data obtained through the Freedom of Information Act:

…the government reported spending a total of $562,500 in rebates for new cars and trucks that got worse or the same mileage as the trade-ins — in apparent violation of the program’s requirements.

…677,081 clunker trade-ins processed by the government through Oct. 16. More than 95,000 of the new vehicles purchased under the program — or about 1 in 7 — got less than 20 mpg, according to the data.

…The data show the average fuel economy was 15.8 mpg for the old vehicles and 24.9 for the new ones.

…In at least 145 cases the government reported consumers traded old vehicles that got better than or the same mileage as the new vehicle they purchased. A driver in Negaunee, Mich., traded a 1987 Suburban that got 18 mpg for $3,500 toward a new Silverado pickup that got only 15 mpg. An Indianapolis driver traded a 1985 Mercedes 190 that got 27 mpg for $3,500 toward a new Volkswagen Rabbit that got only 24 mpg. In at least 15 deals in nine states, owners of large pickups cashed in old trucks for between $3,500 and $4,500 toward new Hummer H3 SUVs that got only 16 mpg.

Okay. Maybe cash for clunkers was not the best at improving fuel economy or taking the dirtiest vehicles off the road. But it did stimulate sales. Even if it was, according to Edmunds, at a cost to taxpayers of $24k, not $4k per car.

The industry research juggernaut claims that of the 690,000 vehicles sold under the program, only 125,000 of those sales went to people who weren’t going to purchase a new car in 2009. The result, says Edmunds, is that the $3 billion spent for C4C ended up spurring only 125,000 sales at a cost of $24,000 per vehicle. Further, Edmunds claims that October’s sales would have ramped up even more than what current projections indicate.

And if you’re wondering why I continue to rant on about Cash for Clunkers? It is to counter the seemingly intelligent people in and out of our government who are still claiming C4C was a great success and using that “success” as justification for other consumer driven “stimulus” programs such as the cash for appliances, cash for new home buyers (extending an $8,000 tax credit for first-time home buyers). And now a cash for caulking program (aka – Home Star to make existing homes more energy-efficient.) There will be more on Home Star in an upcoming post.

My point is that the consumer economy is dying and it should be laid to rest and buried. Unfortunately, our government is not only trying to resurrect consumerism, they are intent on dragging us into a debt coffin as a replacement and they are using these clunker programs (as discussed here, here and here) along with health care reform and any other legislation they can get passed as the shovels with which to bury us.

Our government and the Obama administration need to move beyond the old Nike slogan from the 80’s. To “just do it” does nothing but set us up with clunker goals. And clunker in = clunker out. We need and deserve better. Now more than ever, we need to focus not just on what we do, but how we do it. And if our government officials can’t understand that simple concept, then maybe they need step aside so more qualified professionals can do the job.

UPDATE

Ah, remember just a few weeks ago the White House was touting the success of “Cash for Clunkers” and attacking Edmunds for their faulty analysis with:

We found out that motor vehicle output added 1.7% to economic growth in the third quarter — the largest contribution to quarterly growth in over a decade.

Well, today the revised GDP numbers for the third quarter were released. AND …

… automotive consumption was less than half of what was initially estimated, contributing 0.81 of a percentage point to growth.

Not good. And from the AP, even worse –

Tuesday’s report showed that overall consumer spending grew at a pace of 2.9 percent last quarter. That was down from a 3.4 percent growth rate first estimated

And that is not just me saying it bad. Here’s Paul Krugman take:

Given the latest number, the date at which we can expect to see a return to full employment is … never. And that’s if growth continues at this rate. The odds are good that growth will slow down next year: the stimulus has already had its peak effect on growth and will turn into a net drag in the second half, the inventory bounce — which was a major factor in 3rd quarter growth, such as it was — will fade out. Basically, we may be in a technical recovery, but we’re not recovering.

Update II

Texas A&M research paper (2014) on the results of Cash for Clunkers “Cash for Corollas: When Stimulus Reduces Spending” 

###