How Much Did 'Cash for Clunkers' Cost?

The White House is in sharp disagreement with a new report by Edmunds.com indicating that the Cash for Clunkers program cost some $24,000 per vehicle when the program's total cost is spread out over the number of "incremental" cars sold.

As was the case for the homebuyer tax credit, said to cost $42,000 for each home sale the program spurred, there seems to be a fundamental disagreement over how many sales were made that would not otherwise have been made.

Edmunds claims to have had a crack team of PhDs and statisticians working on this problem, crunching the numbers, the end result obviously not to the liking of staffers at the White House. Based on the graphic in the last post, it sure looks like there was some sort of an outside influence involved.

According to this story in the Detroit Free Press, the motives of Edmunds are political.

But Mike Jackson, CEO of AutoNation, also defended the program. Of Edmunds, he said: “Simply put, they’ve misrepresented the facts, and the White House is completely justified in calling them out on it. It would appear that their political views have tainted their usual rigorous approach to research."

I've found the Edmunds.com website to be quite helpful over the years. In fact, it's pretty much indispensable if you're trying to decide between many different makes and models before making an auto purchase.

But, they've got a political agenda too?

The news outlet that may not be a real news organization filed this report, which, aside from the typos in the first paragraph, looked pretty professional to me.

The Obama administration (White House and Transportation Depatment) did some heavyweight policy sparring with Edmunds.com today over criticism that Cash for Clunkers might have cost taxpayers $24,00o per vehicle sold.

Edmunds.com came to that figure by estimating that only 125,000 of the Cash for Clunker program's 691,000 documented vehicles sales were a direct result of cash incentives.

The White House fired back as did DOT, arguing in pretty strong language, alleging that Edmunds' was calculating mystery auto sales on Mars and missing real show-room deals in the grand old USofA (okay, it didn't say the USofA part).

I asked top White House economist Jared Bernstein about the Edmunds.com flap late Thursday. Here's his answer.

"It may well be the case that some of the sales in Cash for Clunkers were sales that would have occurred anyway, but wouldn't have occurred when they did. In other words, I'm sure that some of those sales were pulled forward - maybe a quarter, maybe 6 months, maybe a year. And that's okay, especially when you look at today's GDP report where we are posting positive growth and where consumer durables including autos is a big contributor, we really need that growth now. Pulling sales forward is actually helpful."

While not a regular reader of the White House blog, that particular item linked to above (and again here) had a doozy of a headline:

Busy Covering Car Sales on Mars, Edmunds.com
Gets It Wrong (Again) on Cash for Clunkers

Apparently there's some history between these two...

Comments

[Michael Clark:]

Who would you believe? Would you believe your own government, with its history of lying to save its own asses?

Nov 01 07:53 AM

[grandad:]

Will this political bull ever stop. All of the cars traded were cars that were probably close to the end of their useful life, I had one myself but it was not eligible because it was listed as 18 MPG. Did some of the people sell their cars a little sooner than they had planned to take advantage of the offer, OF COURSE. I wish I could have done the same thing. Wasn't the purpose of the offer TO STIMULATE the economy ? Which it did ! Each of those people who sold had to come up with 15 or 20 K out of their own pocket. I call that a stimulous

Nov 01 10:54 AM

[D. McHattie:]

White House economist Jared Bernstein: "In other words, I'm sure that some of those sales were pulled forward...we really need that growth now. Pulling sales forward is actually helpful."

This statement says a lot about this administration's approach to the economy.

Borrow growth from the future. Kick the can down the road. Cross that bridge when we come to it. Why do today what we can put off until tomorrow.

Is this administration so unforgivably stunned that it actually thinks this is a sound approach?

Nov 01 11:17 AM

[waldipup:]

As already pointed out , the White House response is unbelievable -

Admitting that they are fast forwarding future potential economic activity to satisfy the immediate -

To simply admit this as a defense(!) of their program is mindboggling , because it demonstrates what they consider a viable mindset without even blinking -

As the Grass Roots put it , "Lets Live For Today".
Everything they do does not take into consideration the longer term effects it has -

Sure , these would be great "solutions" -

If there was no future to consider!!!!

Nov 01 04:39 PM

[tripleblack:]

Look at ANY government program involving complex, hard-to-supervise money changing hands.

First they are asking us to assume that fraud NEVER took place...

OK, how do they even try to tell us that? Because they installed intricate (and in many cases, nearly impossible to comprehend) checks, balances, inspections and rejections, all up and down the line. Folks, THIS is an expensive process, in and of itself. So let's take them at their word, they really DID install a robust bureaucracy staffed with competent folks who worked long hours to pull off the Clunkers program...

Read back over that. Figure $$$$ for the government to DO that, then multiply it by hundreds of thousands of transactions...

Heap big overhead.

In many very simple and long-standing federal programs, no one bats an eye when the overhead component of the budget is 50% of the total. IE, $100 in, and $50 hits the target, the other $50 absorbed by the giant bureacratic amoeba in between.

Even if we assume that only HALF the money went to feed the Federal system, and half to pay for cars, its a joke.

Nov 02 12:02 PM

[Michael Eis...:]

Two comments:
1. Does the White House and Pres. Obama not have more important issues to deal with than a post at Edmunds.com? That is a tad thin-skinned I would say.

2. The White House is not exactly filled with the best thinkers these days. They are a bit behind the times :) see sixkidsandafulltimejob...

Nov 02 12:41 PM

[bobbobwhite:]

Ever held a gov't job of any level? What you stated is its modus operandi on every day of the week, no matter what happens.

"Why do today what you can put off indefinitely? We're the gov't, we don't have to care what they say or answer to anyone for anything."


On Nov 01 11:17 AM D. McHattie wrote:

> White House economist Jared Bernstein: "In other words, I'm sure
> that some of those sales were pulled forward...we really need that
> growth now. Pulling sales forward is actually helpful."
>
> This statement says a lot about this administration's approach to
> the economy.
>
> Borrow growth from the future. Kick the can down the road. Cross
> that bridge when we come to it. Why do today what we can put off
> until tomorrow.
>
> Is this administration so unforgivably stunned that it actually thinks
> this is a sound approach?

Nov 02 01:14 PM

[bobbobwhite:]

"We are your gov't and we can delay anything until whenever. We can do work or not and we don't care about what you think of us and we don't have to answer to anyone. But, be sure you send us your entire tax obligation which is, of course, the only obligation we respect. Do it today."

Nov 02 01:25 PM

[Windsun33:]

And in the same blog entry, they say "On the same day that we found out that motor vehicle output added 1.7% to economic growth in the third quarter"

So if those sales were pulled forward, and those same sales just about doubled the GDP, I assume that means they will subtract from the next quarter GDP, making for some really ugly numbers. Voodoo economics at it's best.


On Nov 01 11:17 AM D. McHattie wrote:

> White House economist Jared Bernstein: "In other words, I'm sure
> that some of those sales were pulled forward...we really need that
> growth now. Pulling sales forward is actually helpful."
>
> This statement says a lot about this administration's approach to
> the economy.

Nov 02 01:47 PM

[Bigman16:]

Main Entry: cap·i·tal·ism
Pronunciation: \ˈka-pə-tə-ˌliz-əm, ˈkap-tə-, British also kə-ˈpi-tə-\
Function: noun
Date: 1877
: an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market

Nov 02 03:53 PM

[a. palmer jr.:]

I guess if the cash for clunkers thing worked we need to reinstate it along with a cash for shacks deal so people like me can trade in our old cars and houses for new ones. Our heirs can pay them off.

Nov 02 09:50 PM