Wednesday, August 5, 2009
The news is out that the Obama administration is delaying the release on the details for the Cash-for-Clunkers program. I’m reading and seeing a lot of speculation from the right that the reasoning for this delay is that the information proves the program was a failure. That the administration is holding onto the details so that it does not become a factor in the senate vote. This may be true, but I have a different theory.
I do not believe that the administration is withholding the figures because there is something to hide, but something they want to promote and promote big when the time is right. Unemployment data is coming out on Friday and this is usually the data that is thrown in Obama’s face every month. I believe that the Obama administration hopes to make the case that the Clunkers program was wildly successful in the hopes of quelling the stimulus doubts and trying to place a checkmark in their economic win column. Here is what I believe they will try and sell.
We haven’t heard much about GM and Chrysler bailouts lately. The takeovers were largely unpopular and very poorly executed. When they release the data, I expect to find out that GM and Chrysler’s sales are up (much like Ford’s, but far less). They will try and make the case that the program is stimulating the auto industry and that the government is doing an excellent job turning around the car companies.
Some other possibilities that are related to the future Clunkers propaganda might be:
- We hear news that because of the program, they are delaying some of the scheduled layoffs
- GM and/or Chrysler announces they will be able to pay the government back a portion of some of the money they received
- The administration starts touting some large number of jobs created or saved due to the program
Reuters had a great article talking about how the Clunker’s program is not going to stimulate the economy. I wanted to add my own economic thoughts on the program. The program is much like Bush’s June 2008 stimulus. It will get people to buy new cars. However, the point of demand side stimulus is to create an increase in purchasing that leads to an increase in business investment. In this case, the car companies know that the spending is limited and temporary. The program will not cause new factories to open, new jobs to be created, or new investments to be made. Therefore, the Clunker’s program does not stimulate anything.