Quote:
Originally Posted by dude1394
Transparency...thy name is barry..  |
geez, it's amazing at the extent some people will go to bitch. the cash for clunkers program is proving to be not just a success, but a huge success, and yet here's a post griping about some perceived lack of "transparency".
here's some "transparency" for ya....
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Trade-In Program Tunes Up Economic Engine
By JUSTIN LAHART
Of the nearly $800 billion of stimulus funds, the $1 billion "Cash for Clunkers" program may offer the most bang for the buck in terms of jump-starting the economy.
The program comes as auto dealers' inventories are running lower, after the bankruptcy-related shutdowns at General Motors Co. and Chrysler LLC.
Car companies may need to raise production as a result, and to do that, they will have to boost their own depleted stockpiles of raw materials and parts.
The prospect has some economists scrambling to raise their forecasts for growth in the second half of the year.
"A billion dollars for 'cash for clunkers' looks dramatically more efficient, dollar for dollar, than anything else the Congress has passed yet," Credit Suisse economist Neal Soss wrote in a note last week.
The program played a big role in his upward revision of his projection for gross domestic product. Mr. Soss now expects GDP to grow at a 2% rate in the third quarter, up from his previous 1.3%.
"The blowout response to the cash-for-clunkers incentive program has been far stronger than we expected," wrote Morgan Stanley economist Richard Berner in a note Monday. He now thinks GDP will grow 3% to 4%, up from his firm's earlier forecast of 1%.
The longer-term effect of the program remains unclear. Some economists believe cash-for-clunkers merely moves spending on cars that would have occurred at some later date into the current quarter. "The essence of what it's going to do," said Nomura Securities economist Zach Pandl, "is move purchases up in time."
That in itself, coming at a time when the economy appears on the cusp of recovery, is helpful, Mr. Pandl said. By boosting demand in the near term, the program will help bolster growth after a year of contraction, adding to the confidence of businesses and consumers alike. That, in turn, could lead them to increase spending.
Some suppliers are still waiting for the cash to trickle down, and with the clunkers program a little more than a week old, it will take some time before the extent of its ripple effects can be known. About two-thirds of the metal and plastic parts St. Louis-based Bachman Machine Co. sells goes into cars, but so far President William Bachman says he hasn't seen business pick up.
"I would think it would help a little bit," he says of the program. "If nothing else, it will move some inventory."
The clunkers program's "multiplier effects" -- where overall spending in the economy rises by more than the government's own outlay -- is a point of contention.
In a recent paper, economists John Cogan and John Taylor of Stanford University in California and Tobias Cwik and Volker Wieland of Goethe University in Germany theorize that because government spending raises inflation expectations and leads to higher budget deficits, it leads to higher interest rates and expectations of higher taxes that end up lowering spending, leading to small multiplier effects.
Another paper by economists Lawrence Christiano, Martin Eichenbaum and Sergio Rebelo at Northwestern University in Illinois takes a different tack, arguing that when overnight interest rates are near zero, as they are now, the multiplier effects become unusually large, because spending jolts consumers out of extreme caution.
At his eight Boston-area dealerships, Village Automotive Group President Raymond Ciccolo says the sales he has made on the clunkers program are to customers who wouldn't normally buy new cars. At the same time, he has seen an upsurge in traffic from customers whose cars are worth too much to qualify for the program.
"Any time you create traffic, you create the ability to sell a car," he said. "And if we can start selling cars now, they start coming back for oil changes, for body work, for new snow tires."
Meantime, the increase in sales provides an income boost for the nearly 500 people that Mr. Ciccolo employs, giving them more wherewithal to spend. Similarly, if auto companies step up production, their workers will be working more hours, boosting their incomes and ability to spend.