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  • Cash for Clunkers Gimmick? Former Obama Adviser Wouldn't Do It Again

    It sounds like a former Obama Administration official is changing his tune on two of the President’s early stimulus efforts. Austan Goolsbee, former chairman of President Obama’s Council of Economic Advisers, says that in retrospect he would not have supported the Cash for Clunkers program or the home buyer tax credit. Politico reports:

    “Because we didn’t know if [economic recovery was] going to be short or long,” the Obama administration tried measures to address both scenarios, Goolsbee explained on MSNBC’s “Morning Joe.”

    “If you look at Cash for Clunkers or the first home buyer tax credit, they were geared to trying to shift [recovery] from 2010 into 2009. Given it’s taken this long [to recover], I don’t think you would do that short-run stuff,” Goolsbee added.

    But hold on, don’t give Goolsbee too much credit. Though he recants the “short-run” measures, he said he still supports the President’s overall stimulus program, despite the fact that the U.S. economy is still a stagnant swamp of slow growth. For Keynesian economists, old habits die hard. Much of the economy’s poor performance, though, has to do with the Obama Administration’s reliance on short-term gimmicks like Cash for Clunkers and the home buyer’s tax credit to give it a boost.

    Take Cash for Clunkers as an example. Flash back to Detroit, June 2009. General Motors and Chrysler won big bailouts from the federal government, but auto sales were down 34 percent from the prior year. At the urging of the United Auto Workers and the auto industry, President Barack Obama signed Cash for Clunkers into law his “Cash for Clunkers” program — —a plan designed to incentivize new car sales and give the Detroit Three a boost. The plan provided $3,500–$4,500 rebates to consumers who purchased more fuel-efficient cars and traded in their old vehicles, which dealerships then destroyed.

    Guess what? It didn’t work. In September 2010, a study was released showing that the program boosted auto sales by 360,000 during the two months it was in place. But NPR reported that “in the seven months that followed, sales were down by 360,000 compared to what they would have been without the program.” In short, the program didn’t encourage people to buy new cars—it only encouraged future buyers to make their purchases sooner.

    The home owner’s tax credit didn’t fare any better. In an interview with Newsmax, Heritage’s J.D. Foster explained that it weakened the housing sector by introducing uncertainty into the marketplace:

    “One of the things the real estate market needed is to figure out what the correct prices are for houses in different communities. You bring the tax credit in and bump up consumption, home purchase incentives do work. But what you do is slow the process of price discovery.

     

    “Then the tax credit expires,” says Foster. “Buyers and sellers don’t know what the prices in communities ought to be. So, transactions don’t happen, because you can’t come to an agreement.”

    Despite its record of failure with these specific short-term measures and with the stimulus as a whole, the Obama Administration is calling for even more of the same kinds of gimmicks to create new jobs in America. It hasn’t worked before—as even Goolsbee seems to acknowledge—and it’s not going to work in the future. In their new paper, “Avoiding America’s Lost Decades,” Heritage’s Derek Scissors and J.D. Foster explain what’s needed to help restore growth to the U.S. economy:

    Though much damage has already been done, the American economy is still fundamentally flexible and resilient. What is needed is to jettison the convenient fantasy that deficit spending stimulates the economy and instead adopt a more benign attitude that, for the sake of recovery, Washington should “first, do less harm,” which means:

     

    • The federal government should rein in spending to restore a degree of confidence in America’s future,
    • The President should stop threatening higher taxes, and
    • The Administration should end the regulatory attack on America’s businesses.

    Click here to read more of “Avoiding America’s Lost Decades.”

    Posted in Featured [slideshow_deploy]

    11 Responses to Cash for Clunkers Gimmick? Former Obama Adviser Wouldn't Do It Again

    1. Bobbie says:

      Goolsbee gets no credit "because we didn't know" they rushed to steal from Americans to make it look like something was being done? What an incompetent excuse! And because they "didn't know" still they neglected to think things through as their conduct of the same continues.

      Letting those government shouldn't have bailed accountable to their own consequences like it's always been would've worked like it always has. Rules that once applied to all, are now divided to make it easier for some that puts more on others, like first time homeowners. It isn't appropriate in America and either is the conduct of this unAmerican irresponsible, administration!

    2. mhsnider says:

      Thanks to Obama's Cash for Clunkers my small auto repair business lost 80% of it's business. Customers that had been repairing their old cars traded them in getting 4 and 5 times what they were worth. So not only did I lose business to the government, I have to pay taxes to the government to pay for this. Thank you Obama.

    3. fxgeorges says:

      Washington warned us sternly that if the debt ceiling were not raised, the stock market would fall and our debt would be downgraded, resulting in higher interest rates for everybody. Some of us were labeled "radical" and even "terrorists" for suggesting we live within our means. Four days ago, we raised the debt limit by the largest margin in our history. Since then, the stock market tanked and we just got our debt downgraded. Oust the central planners before it's too late!

    4. King David says:

      I love my 83 Toy -yeah and I live within my means too! Can't afford it then DON'T BUY IT! It is such a downer to hear about the GINORMOUS WASTE spent in Iraq — An emmbassy as big as the vatican-ugh!
      Get rid of big govt. – BEWARE THE GOVERNMEMNT COMPLEX! Ron Paul knows what is right!

    5. Pete Houston says:

      "Cash for Clunkers" That is the current fundraising for the Obama 2012 Campaign. I can't beleive that ordinary people give money to this guy. The Unions, government workers, and GE I get. They get a return on their investment. The average person just gets screwed for their investiment in the corruption.

    6. Lloyd Scallan says:

      We should realize the major reason Obama employs only "short term policies" is because he knows his time is limited before the people wake up and understand what he is doing to our nation. He was given one term (4 years) to complete the agenda that was started almost 100 years ago. The powers that put Obama in the White House knew going in they had only one shot. After that it will be decades before they have another chance. Ask why Obama is constantly employing his bills should be passe ASAP. It worked with TARP and ObamaCare. But then the Obama agenda was exposed.

      • Bobbie says:

        Further exposure necessary, America is under siege and congress MUST know and act to counter it! NOW!!

    7. India tours says:

      Tourism has become a popular global leisure activity. In 2010, there were over 940 million international tourist arrivals worldwide, representing a growth of 6.6% when compared to 2009.[2] International tourism receipts grew to US$919 billion (€693 billion) in 2010, corresponding to an increase in real terms of 4.7%.

    8. President Obama signed economic stimulus legislation in the form of the American Recovery and Reinvestment Act of 2009 and the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. Other domestic policy initiatives include the Patient Protection and Affordable Care Act, the Dodd–Frank Wall Street Reform and Consumer Protection Act, the Don't Ask, Don't Tell Repeal Act of 2010 and the Budget Control Act of 2011.

    9. Cash for Clunkers" That is the current fundraising for the Obama 2012 Campaign. I can't beleive that ordinary people give money to this guy. The Unions, government workers, and GE I get. They get a return on their investment.

    10. John Paulson says:

      What is Steven Cohen buying recently? His picks did well last

      year.

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