My thoughts on political strategy and Cash for Clunkers

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.


MommyLoves said...
This comment has been removed by the author. August 5, 2009 at 8:00 PM

Great points Cgen, we'll see how this things pan out over the next few days. I can definitely see the possibility of what you are saying, very devious...

August 5, 2009 at 10:01 PM
The Law said...

I agree... this will ultimately prove to be a costly and ineffective program. The intent of this program was threefold:

1) Offer a quick boost to the ailing auto market
2) Promote green technology (hybrids and electric cars)
3) Show the effectiveness of the stimulus package.

With #1, who can resist a sale? Of course the cars will sell out! But when the sale is over, I expect the lots to fill up and stay filled up again. People want to buy cars, but no one has the money to do so! The better way is to increase spending power by *ding ding ding* get Americans to work!

Re: #2, this program did seem to do a good job of promoting green tech cars. The problem with new technology is it is always expensive in the beginning. Without a market to sell these cars to, the lack of demand slows innovation for these products. In this sense, the Cash for Clunkers program may have found a tad bit of success.

Re: #3 - FAIL. When I signed off on the stimulus package, I was under the impression that everywhere I look there is a contruction vehicle nearby, fixing a road or building a building. This is not stimulus. Stimulus is getting peopel to work so they can buy cars without programs.

Soooooooo what was the Cash for Clunkers program in the end? A multi-billion dollar advertisement for next gen fuel efficient cars.


August 6, 2009 at 1:38 AM

LCR - Thanks. We will see.

tL - True. I think you'll agree too, that the green car technology of today is both insufficient and will soon be obsolete any way.

August 6, 2009 at 7:55 PM

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