From the Coyote Blog, see the graph below. Stimulus funds just create purchases now that will be forgone later. And they subsidize the purchases with tax funds or debt, basically transferring funds from one person to another for no good reason (other than buying votes, of course).
The dotted line simply averages the sales for the month of the clunkers program and the month after. I think it is pretty clear that we spent a few billion dollars making some used car owners happy (by overpaying for their vehicles) but did absolutely nothing to move the trend line in auto sales, as the program appears to have just pulled forward purchases rather than stimulated new ones.
Was this predictable? Of course. In August 2009 when Cash for Clunkers was announced, we said:
The funny thing is that down the road even the dealers will suffer, because this program created false demand and just kicked the can down the road so that the dealers could put off their day-of-reckoning a little longer.
You can read our full Aug 2009 analysis of Cash for Clunkers and get educated on the Broken Window Fallacy that Government commits, daily.
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June 3rd, 2010 at 1:03 pm
A picture really is worth a thousand words. Nice chart. Unfortunately, your very accurate conclusion tells me what I have been saying for many months. Massive government programs do more harm than good. The only thing this spending has done is mask the fact that we are still in a bad recession and when the mask is pulled off, what we will be left with is a much worse situation, a deep recession and big time inflation.