Saturday, October 31, 2009

'Cash For Clunkers' Costlier Than Advertised-; Also, NANESB! Digs up the Railway Equivalent for $$ for Clunkers

The publishers of the Blue Book guide to used-car prices determined that the earlier Cash for Clunkers program actually cost the American taxpayer approximately $24,000 per new car sold during that time frame. According to the study, out of the estimated 690,000 cars that were sold while Cash for Clunkers was in effect all but 125,000 of them went to people who were had decided to purchase a new car anyway.

[Edmunds] crunched the numbers. A valid way to evaluate the program economically, it says, is to look at how many people purchased cars that otherwise wouldn’t have been bought. The firm says that number is about 125,000 cars. By that measure, the government spent $24,000 to generate each sale of a new car.

For comparison, the average price for a new vehicle in August 2009 was $26,915, minus an average cash rebate of $1,667.

In all, the government spent $3 billion on a program that provided cash toward 690,000 car purchases – about $4,348 per car. That makes 565,000 people who got as much as $4,500 to buy a car they would have bought anyway, according to the Edmunds analysis.

While the White House took exception to the claim, the Obama Administration's 'New Media' Chief Macon Phillips decided to quietly take the high road.

/Just kidding!

“In other words,” writes Macon Phillips, the White House’s “new media” chief, “all the other cars were being sold on Mars while the rest of the country was caught up in the excitement of the Cash for Clunkers program. The CEA’s analysis is transparent and comprehensive …, on the other hand, is promoting a bombastic press release without any public access to their underlying analysis. So put on your space suit and compare the two approaches yourself.”

You'll also be pleased to know that the rail industry has what could be considered a long-running predecesor to Cash for Clunkers for the past few years. Straight from National Railway Equipment's website is this PDF file explaining that the purchase of some of the Genset locomotives manufactured by companies like NRE or Railpower International are eligible for state, local and federal subsidies of up to 80%. When these gensets were first introduced, I assumed that Class I Railways like BNSF or Union Pacific were interested in them because they were effective. Instead, it's because of an artificial demand created by a patchwork of emissons laws across various states, matching funds and various subsidies that have the railroad paying only 20% of the purchase price. If I'm not mistaken, I believe for every Genset a railroad purchases, an older locomotive has to be stricken from the roster to qualify. However, unlike this years' Cash for Clunkers, there is no provision for scrapping the retired locomotive and in a few cases, the recently retired locomotives are sold off to a leasing company and promptly leased back by the same railroad.

1 comment:

  1. Cash for clunkers is proving to be the jewel in Obama's crown of turds.