This AP story on "Cash for Clunkers" puts a pretty negative spin on the program, much more negative than I would interpret the numbers.
First, even if a car gets the same gas mileage, the newer car is safer and less polluting than one manufactured in the mid-1980s. That will save lives and reduce injuries, which ought to count for something. Second, even a one mpg improvement adds up over time. For example, a car that gets 15 mpg, driven over 100,000 miles, consumes 6667 gallons of gasoline. At 14 mpg, you'd need 7,143 gallons, so you're still saving almost 500 gallons over the 5-10 year period it would take for that vehicle to rack up 100,000 miles.
The story also reveals that such small improvements were the exception, not the rule. The average improvement was nine mpg, so the fuel savings are much greater.
Also interesting is the point made near the end of the story. El Monte's Longo Toyota was the nation's single largest beneficiary of the program, with $30 million in sales. Because of the extra city sales tax, that means $6 million to El Monte over just the less-than two-month life of the program, just from Longo Toyota.
That last paragraph nails it.
That last paragraph nails it. Cash for Clunkers was very smart -- it's a "freebie" that induced many people with savings to release their capital into the market, effectively funding an economic stimulus program without that many taxpayer dollars.
Consider that if someone bought a $25,000 car, and got around $4,500 in c4c money - that's still 20k of money released into the economy.
Now, yes, some people took on debt, but, most reports say that the level of debt was low, and many people paid cash, happy to get a great deal.
This 8k homebuyer credit, on the other hand, isn't such a great idea.
The main difference is that people tend to go deep into debt to purchase a house. So, the money being released into the economy is debt.
The 8k basically allows the borrower to borrow more money. That 8k amounts to nearly 200k more loan money. This is just driving prices up for no reason at all.
Yeah, I'm a little skeptical
Yeah, I'm a little skeptical of the $8000 housing credit for the reasons you mention.
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