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Old 04-07-2010, 11:45 AM   #8
Scooby Guru
Member#: 92634
Join Date: Aug 2005
Chapter/Region: RMIC
'18 Pacifica PHEV
'12 RAV4 EV


So did it work?

On June 24, 2009, President Obama signed into law the Car Allowance Rebate System (CARS, commonly known as 'Cash-For-Clunkers'), one of several stimulus programs whose purpose was to shift expenditures by households, businesses, and governments from future periods when the economy is likely to be stronger, to the present when the economy has an abundance of unemployed resources that can be put to work at low net economic cost.

Critics of the CARS program argued that it would have little ultimate effect because most of the purchases under the program would have happened soon anyway - they were merely 'pulled forward' from the following few months. In contrast, the CEA's September 10 economic analysis of the program argued that a substantial proportion of the CARS sales were pulled forward from a far more distant future, and thus represented an important increment to aggregate demand at just the time when such demand was sorely needed.

With seven months of post-Clunkers sales data in hand (September 2009 through March 2010; see dark blue line in figure), now seems a good time for a reckoning.


According to a survey conducted by the Department of Transportation as part of the program, the average timeframe over which new car purchasers said they would have otherwise sold, traded in, or disposed of their old vehicle was 2.87 years - far longer than the timeframe of a few months that the program's critics hypothesized. A plausible interpretation of the available data, in fact, is that many of the CARS sales were to the kinds of thrifty people who can afford to buy a new car but normally wait until the old one is thoroughly worn out. Stimulating spending by such people is very nearly the best possible countercylical fiscal policy in an economy suffering from temporarily low aggregate demand.

CN: Yes, it worked.
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