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Third Base Politics


Thanks for Nothin’, Betty Sutton.

Ohio Congresswoman Betty Sutton’s claim to fame is Cash for Clunkers. It got her on the political map and the program was one of the President’s favorites.

Too bad it was a waste of $3 billion of your tax dollars.

From the Chicago Tribune:

On the surface, it did work, spurring motorists to rush to their local dealers to take advantage of the generous credits, which went from $3,500 to $4,500 per vehicle. New car sales, which had plunged during the recession, suddenly rebounded, to the delight of dealers and carmakers.


But the flurry of action last year was not the whole story. When the exhaust settled, it became apparent that Cash for Clunkers didn’t accomplish much — and much of what it accomplished wasn’t beneficial.

To start with, it didn’t raise auto sales so much as briefly accelerate them. A study by Amir Sufi of the University of Chicago’s Booth School of Business and Atif Mian of the University of California, Berkeley, found that “almost all of the additional purchases under the program were pulled forward from the very near future.” Instead of buying cars in November, consumers bought them in August. So dealers gained early while losing out later.

The $3 billion cost was also higher than it needed to be. George Mason University economist Russ Roberts says any member of Congress watching the showroom stampede should have concluded that “$4,500 per clunker was too big a subsidy and that you can achieve the same effects with a much smaller amount.”

That doesn’t even count the hidden cost of the program: higher used car prices, caused by the removal of 680,000 functional vehicles from the market. Between July 2009 and July 2010, a period of near-zero inflation, the average price for a used car rose by $1,800, or more than 10 percent, in part because of Cash for Clunkers. It’s a perverse form of redistribution: People who can’t afford new cars pay more so that people who can afford new cars pay less.

No doubt about it. Betty Sutton wasted your money.

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Third Base Politics is an Ohio-centric conservative blog that has been featured at Hot Air, National Review, Washington Post, Los Angeles Times, Pittsburgh Tribune-Review, and others.


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