It All Evens Out
President Obama says the economy is doing better than expected. Just what was he expecting, the end of indoor plumbing?
I can't blame him for grabbing onto any good news (things are getting worse at a slower pace) since that's what politicians do. Besides, as long as he's getting blamed for economic problems that aren't his fault, he should take credit for any recovery he has nothing to do with.
posted by LAGuy @ 12:24 AM
6 Comments:
Hmm. let me follow this
- The stimulus is not stimulating the economy.
-The improvements in the economy have nothing to with the administration
Housing has had best quarter since 2002. Ford is showing positive results which they are relating the to "overly successful" cash for clunkers problem.
If I were to summarize the general opinion here as to the economy, it seems to be:
- The economy will fix itself in short order whether we leave it alone or try to stimulate it
- Anything the government does in the way of stimulus is likely to be ineffective in the short run (see above) and have major long term negative consequences
I disagree with both as a matter of theory, but can't provide you with any data -- causation is very tough to prove.
As to cash-for-clunkers, it's universally acknowledged as the best short-term stimulus package the industry has seen in many years. The fact that they exclude my 1996 Nissan Altima (with 172,000 miles and counting) offends me in principle -- the mpg limits on what counts as a clunker is arbitrary and rewards bad past behavior -- but I wouldn't be taking advantage of the program anyway. I like my Altima, which is more than I can say about any American car I've owned since my '78 Dodge Aspen. That's the real lesson the US auto industry seemingly still has failed to grasp.
I can practically guarantee the stimulus isn't working yet since the large majority of it hasn't been spent yet. That people are saying it's working already shows how fallacious the claims of Obama and his supporters are. It's doubly hard to accept the claim that it's helping the economy since, you may have noticed, the economy is still getting worse--but then, if you have faith ("anything good happening must be due to what we're doing"--or better, "we passed something called a 'stimulus' so it must be stimulating the economhy"), little things like that don't matter.
The whole point of a Keynesian stimulus, and one of the reasons it fell out of favor as a solution, is that whatever effect it has, it takes a while for it to show up--longer, in fact, than it takes for the economy to snap back in every recession we've had since the Depression.
I could get into specific programs--you know, how shifting a hundred bucks from your left pocket to your right while losing a few along the way may make your right pocket richer, but does not help you overall--but why bother in the face of this overall nonsense?
Our economy is a large ship that can't be turned around quickly. It will do what it wants to do, for the most part, and any changes the government can effect (which are often at the margins anyway) do, in fact, take years to show up. This is why Obama's programs are so frightening. The damage they can do won't show up until well after he's gone.
Despite being someone on the verge of using the cash for clunkers program (have a '96 Ford Explorer that qualifies), I believe it is yet another short sited government intervention that very well may have signative negative consequences that will be glossed over or lost in the shuffle.
First off, my Explorer is not worth $4500. I doubt it's worth $500. It will cost about $600 for me to get it temporarily running again to get it to the dealer (slave cylinder broke a month or so ago). Personally, I will view the transaction as a refund of say $3500 of the taxes I pay this year, so no guilt on my part in participating in the program.
Nevertheless, economically, the plan is senseless. It is paying with citizen tax money (or defecit generating borrowed money)to destroy working assets in the economy - and that can't be good. It akin to the gov't buying and then destroying food to make food more scarce and thus drive up the price to "stimulate" the agricultural sector. I believe this tactic was actually used in the Great Depression. Reagan did it with cheese, but at least he fed the cheese to school children.
Fundamentally, it can't be a benefit to the economy throw away useable assets. Let's think about what would have happened to these cars without the Gov't program. Many would have been traded in, and resold - perhaps to out of work people who, with a car, would be able to get a job delivering pizza, or as couriers or landscapers (many of the clunkers are pick-ups). So Obama will assert he created jobs for the auto industry, but will never count the other jobs destroyed buy the lack of sturdy used cars we are creating. And, as so often is the case, the damage will impact the lower economic tiers, shifting their jobs to the middle class (unionized auto workers do quite well), while giving tax rebates to the upper economic tier (the people who bought gas guzzlers in the 90s).
In my own case, I was preparing to give the car to an out-of-work, semi-homeless couple I have been helping these past few months. With spare time on his hands, he might have been able to fix the car, and I would have gotten a small charitable tax deduction, and he would have gotten a means of support, or at least honed his auto repair skills. I predict car sales will drop drastically, even farther below where they were, once the gov't subsidy runs out, and all that will have been accomplished is a transfer of wealth to mostly upper economic class folks, and a temporary transfer of jobs from lower economic class to middle class auto workers and car salemen.
Amen. Here's the government giving out free money to destroy assets, and everyone calls it successful when people show up.
The effect on market prices for low-end used cars will be minimal, but you're right that it will disproportionately affect the poor, both through increased prices for the very lowest-quality used cars and because charities will suffer from reduced clunker-for-tax-break donations.
So far 120,000 cars have been traded in through the program, and it will likely max out at approximately 300,000-400,000 vehicles. That's out of a pool of over 200 million cars on the road, of which approximately 15 million are scrapped every year. It will probably mean that the average sale price of an $800 barely-running pickup truck could possibly go up to $850 for a while. Whether there will be any meaningful environmental benefits is debatable -- e.g. your situation (fixing it to junk it) is precisely the one they're trying to avoid with the registration history requirement. But there's no denying it's a very pricey way to increase national fuel economy averages.
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