This morning we reported how The White House had taken to trumpeting the success of Cash-For-Clunkers, once again taking a shot at car website Edmunds.com, a battle that actually started brewing last October.
Below is Edmunds.com’s response:
Today, the White House unexpectedly presented its latest defence of last summer’s “Cash for Clunkers” program. In the process, it took issue with Edmunds.com, whose analysis of the program was widely adopted and supported by independent economists and media.
“One has to wonder why the White House continues to feel the need to defend a program that is no longer being debated,” observed Edmunds.com CEO Jeremy Anwyl. “Trying to add a spin to old news seems pointless when there are more pressing issues for the government to address.”
The White House claims that car sales are much stronger thanks to the Cash for Clunkers program. Edmunds.com offers the following counterpoints:
1. The White House seems to have missed the simple point that car sales were beginning to recover before the Cash for Clunkers program was introduced. Even the program’s proponents would have to agree that it was too little, too late.
2. A properly designed Keynesian stimulus is structured to stimulate the market for 12 to 18 months, providing support while the economy recovers. Cash for Clunkers created an unhealthy spike, distorting the marketplace by suddenly generating about 125,000 incremental new car sales and pulling ahead hundreds of thousands more.
3. Independent economists generally agree with Edmunds.com’s analysis of the program. For example, on November 2, Freakonomics author Steven Levitt blogged about the topic for nytimes.com “Cash for Clunkers mostly just turned out to be a gift from the government to people who happened to be in the market for a new car at the right time…It is relatively easy to move around the timing of when someone purchases a durable good, but much harder to affect whether they buy a durable good or not.”
4. Relatively strong March car sales, which the government specifically celebrates in its report, were artificially stimulated by remarkable incentives programs initiated by Toyota in attempt to deal with its well-publicised woes. March sales were an aberration.
5. The government reports that in the months since Cash for Clunkers, the average Seasonally Adjusted Annual Rate (SAAR) has been 10.7 million car sales. However, if you eliminate data from December and March – two months when consumers believed they could get unusually good deals on new cars – the average SAAR drops to only 10.3 million. Today’s car sales are still abysmally low by historical standards.
“This White House report conveniently avoids an accounting of the program’s costs. For example, new and used car prices were wildly inflated during the program, which especially hurt the car-shoppers who didn’t have a qualifying ‘clunker,'” noted Anwyl. “And what about the costs to the beleaguered taxpayer?”
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