The White House Attacks Edmunds for Reaching Politically Uncomfortable Conclusion on Cash for Clunkers

by Francis Cianfrocca

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.

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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.

TNL
  • bobalt
    Interesting; this is precisely the kind of promotion program evaluation good companies run to assess whether the promotions they run make financial sense. We develop an incremental sales number (and incremental profits) and deduct the full cost (which is the incremental for cost) of running the promotion. There is always some cannabilization of base sales trends, but we try to keep it to a minimum by constantly reassessing what works and what does not work. Governments (under either party) rarely do such assessments, but constructive critics of government do evaluate such programs as Edmunds did. More power to good journalism.
  • Jack_Davis
    I don't think you're blind, Francis. I think they're lying and have been for some time, about this and a lot of other things.
  • phillyfanatic
    Today, CBS came out, of all media outlets, CBS, and told the listeners, watchers that the WH simply is distorting the claim that their, note, their Porkulas created 650,000 jobs. That is pure nonsense. Now the Clunker claim. And what about the drop in consumer confidence today? And when the unemployment numbers jump to 10%, will the Obamabots claim there is a JOBLESS RECOVERY?
  • valwayne
    In Obama's America the "Truth Doesn't Set You Free" it gets you added to the enemies list! The list of oppressed disidents to Obama's reign of tyranny gets larger and larger, ....The Chamber of Commerce, Health Insurance Companies, Fox News, Sarah Palin, Dick Cheney, The CBO, The elderly and sick at town hall meetings. Welcome folks to Obama's Gulag!
  • qbbh
    Why should the Obama Administration attacking anyone who critizes them surprise anyone? This is Chicago politics, now at a National level. If it is not Obama's doing, it is definately Rham's.
  • mistermcfrugal
    Err, I believe it is racist to object to any statements made by Obama or his helpers. Shame on this web-site for "lynching" Obama with the truth!
  • Good thoughts. I read the White House missive and the Edmunds report and was immediately impressed by the fact that one of them managed to include data. Based on the article above, I'll let the other commenters guess which one that would be. ; )
  • Jack_Davis
    I don't think you're blind, Francis. I think they're lying...not only about this but also about other things, and they have been lying for some time. Thank you for keeping your light shining on them.
  • subframer
    Of course cash for clunkers borrowed from future demand. Is this WH dumb enough to think that this was anything but an artificial lowering of prices that created a temporary run on goods? It's actually staggering how naive they are re market economics.

    Of course, since Dear Leader can cure the sick and part the sea with a wave of his hands, I'm sure all will be well......
  • BlackSaint
    Meantime, with 15 million Americans without jobs, the invasion continues, no Liberal Politician will address the 500 pound gorilla in the room, and millions of invading, plundering, welfare loving, prolific breeding, Illegal Aliens taking millions of jobs that should be American jobs and 100,s billions of dollars in social services that should be for American citizens!

    One cannot be political correct and admit that Illegal Aliens are an large part of the problems in this Nation.

    Their negative impact extends to every area from Sub-par loans & defaults, Underground economy, Massive document fraud, Lower standard of living, Crime, Overflowing prisons , Bankrupted hospitals, Failing schools, Property Taxes, Insurance costs, Environment, Culture, Welfare costs, Welfare fraud, SS fraud, Voter fraud, Disrespect for our laws & country, our Constitution against invasion and even Balance of payments occurring from oil and other imports to support the 20 to 30 million illegal aliens in this country!

    One has to only look at Calif. which is basically mostly an Spanish speaking, Bankrupt state that cannot afford to provide Welfare, Schooling, Medical, Prison cells etc. for millions of MS-13 Gang bangers, Drug dealers, Rapist and other assorted Criminals and uneducated, Prolific breeding, third world rejects from Mexico!

    In a very few years it will be impossible to see where Mexico ends and Calif. begins as both will be an third world cesspool!

    Failure to secure our borders and reward the Invading horde for their invasion and their relatives in an never ending chain with American Citizenship is nothing less than committing National Suicide & will assure our future is an over populated Spanish speaking third world Nation that is an Cesspool of Corruption, Crime, Poverty and Misery modeled on Mexico!
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- February 9, 2010 -

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