It seems to be almost common sense to me that after an artificial boom in sales that there would be a huge crash. People bought WAY more cars than they would have otherwise so now there is even less demand than there would have been had we not forced a boom.
^^^^^^^^^^^^^^^^^
Everybody who was thinking about buying a new car has now bought one. Expect a crash in the auto industry.
lol
OH NOES, NOW THAT WE DON'T HAVE A REBATE PROGRAM NO ONE WILL EVER BUY A CAR AGAIN FROM THE MISMANAGED AUTO COMPANIES DURING THE WORST RECESSION SINCE THE 1930'S!
HOW COULD THE GOVERNMENT DO THIS, HOWWWW!!!!!
Indeed, the argument that cash for clunkers was ineffective because it merely pulled forward demand misses the point that that some of those people who bought cars under this program would not have bought a car next month, or the next, or the next, or indeed for a very long time, had it not been for this program.
Calculated Risk has estimated that at the current sales rate of under 10 million a year, the replacement rate for the existing US fleet is about 27 years. That means that at the current sales rate, cars would have to last an average of 27 years unless there was a permanent shrinking of the fleet.
Assuming that demand will rebound to a historically average 15 year replacement rate, which translate into an annual sales rate of 15 million units a year, similar to what was last seen in 2007, then cash for clunkers accomplished its goal of pulling forward demand from the future recovery phase (where it would have been artificially high due to pent up demand) to the present.
Assuming that no rebound in auto demand is coming in the future, then cash for clunkers created new sales where there otherwise would not have been sales in the future either.
We have heard of the idea 'something for nothing', that is, you can't have any gain without some cost (e.g., spending money), but until this year I'd never heard of 'nothing for something', that is, you can spend billions of dollars and not get anything in return. When the government spends $2 billion it ends up in someone's pocket: part the buyer, part the seller. So it was certainly stimulative.
