Cash for Clunkers Critics Get White House Response

Obama administration fires back against criticisms.

By SHARE

The White House has responded to an analysis of the Cash for Clunkers program by Edmunds.com that claims the program created only a trivial amount of new car sales, and many of the cars purchased under the program would have been sold anyway. Here's a point by Macon Phillips, the White House director of new media:

This analysis ignores not only the price impacts that a program like Cash for Clunkers has on the rest of the vehicle market, but the reports from across the country that people were drawn into dealerships by the Cash for Clunkers program and ended up buying cars even though their old car was not eligible for the program.

[emphasis mine]

That point goes two ways though. If we include cars that weren't directly eligible for the Cash for Clunkers program in our analysis, that means we need to look at the used car market. Of course, as I've pointed out before, subsidizing new car purchases is a good way to push up prices in the used market. A whole class of consumer for which used vehicles is all they can afford were pretty much given an "anti-stimulus."

Phillips' second argument is that the program will have aftershocks that extend into the fourth quarter, as automakers ramp up production to fill depleted inventories. That's quite possible, but the question is will they find any buyers? Or have U.S. consumers already had their demands for new cars? That's the argument made by Megan McArdle and others—that Cash for Clunkers just moved auto sales forward.