Don’t you find it interesting the amount of effort this White House puts toward going out of its way to discredit its critics by name?
In the latest episode, they take aim at an analysis of the CARS (”Cash-for-Clunkers”) program by auto analyst Edmunds.com, contrasting its methods and conclusions with those of a report by the Council of Economic Advisers.
The essence of the White House’s critique of Edmunds is that they reached the “wrong” conclusions.
The White House hates the fact that the Edmunds story contained a brilliant headline. The Obamians won’t quote it of course. But in case you missed it, Edmunds concluded that each vehicle sold with a CARS-program assist actually cost taxpayers more than $24,000.
How could that have happened? Because a lot of the sales of vehicles that took place with a taxpayer assist would have happened anyway. According to Edmunds, the number of INCREMENTAL sales (sales that would not have occurred without the Clunker subsidy) was closer to 125,000 than to the nearly 700,000 the government claims.
Did that make sense to you? Nearly 700,000 vehicles were purchased this summer with a taxpayer subsidy, but only about 125,000 of those purchases would NOT have occurred without the subsidy.
The White House accuses Edmunds of not publishing their analytical methodology. Either I’m blind or they’re lying. The analysis was based on an examination of parallel sales trends of vehicles (like luxury cars) that were NOT eligible for a CARS subsidy. These trends showed a steady improvement in overall vehicle sales over the subsidy period. Edmunds assumed the historical sales ratios between luxury cars and non-luxury models, and they compared them to the actual sales increase observed for the CARS-eligible categories. That gave them an above-trend increase of about 125,000 units. Whether or not it’s true, it at least makes sense.
What we actually saw in September, after CARS ended, was that sales collapsed, in fact to almost the worst annual selling rate we’ve seen all year. This is what you’d expect if the CARS program didn’t actually stimulate demand, but instead “borrowed” it from subsequent months.
But if Edmunds is correct, then you would expect that car sales will show slow but steady improvement over the next few months, as the statistical noise from CARS washes out. I’ll be watching like a hawk, and will give you the scoop as soon as the data are in.
One data point I found fascinating, and which might support the expectation of slow improvement, is the average selling price for a new vehicle during CARS: at a touch over $26,000 before incentives, it’s not far off the historical average. That suggests a market that isn’t in the process of fundamentally readjusting to lower valuations. If this turns out to be true, it hugely good news for the auto industry.
What is the White House saying instead? They’re arguing a straw man. They’re not refuting in any way Edmund’s case that the auto market may be in the process of slowly healing, even without free money smilingly dispensed by Barack Obama.
What they’re saying is something totally different, and in fact quite defensible: that the industry ramped up production runs in order to meet the extra demand from the CARS program. Hilariously, they point out that private automakers did this based on their sales forecasts, and so the market must be right.
First off, much of US automaking capacity is no longer private. The UAW, along with their business partners the taxpayers, now own a good chunk of GM and Chrysler. The government is part of the decision-making process, and is entirely happy to force non-market outcomes when they think it makes sense.
More to the point, the US automakers largely stopped making cars in the first half of this year, so they were running on almost no inventory. At some point, you just have to rebuild or you have nothing to sell.
And third, it would have been clear from the trends noted by Edmunds that demand has been recovering slowly even without the CARS stimulus.
Instead, the White House is stressing that the accelerated production runs acted to preserve jobs among unionized automakers. This is the point they really care about. Not whether you and I are in the market for a new car.
From an activist economic policymaker’s point of view, what matters isn’t whether demand is picking up. What matters is whether there is an uptick in employment. And it’s right that this should be the White House’s focus.
But the White House has a political problem because they badly need for the rest of us to give them credit for any improvement in the economy. The Clunker program has been convincingly criticized as a waste of public money. It doesn’t serve Obama’s interests to hear anyone say, let alone prove, that economic conditions are getting better on their own.
That’s why he decided to shoot the messenger.
