Obama Stimulous Costing Big Money

Cash for Clunkers was an expensive waste of time.

American taxpayers paid a lot of cash for those clunkers: $24,000 for each new car sold, according to a study released Wednesday.

That’s a lot of money, especially when the so-called “cash for clunker” stimulus program offered only a maximum $4,500 in cash for each person who traded in an old gas-guzzler and bought a new car.

The government could have done almost as well by just giving away cars for free, instead of creating an elaborate incentive program, according to an analysis by the automotive information firm Edmunds.com in Santa Monica, Calif.

What happened?

Well, it’s in how 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.

So most of the money was just paid for people doing what they otherwise would have, very little actually “stimulated” the economy by generating new demand.

Ok, so what about job creation generally?

Of the $787B stimulus package, $339B has been awarded and the first $16B reportedly created 30,083 jobs.

Not a good look. You can see the numbers here at the official website. I’ve crunched some of the states, and in the 3 highest (darkest) ones that have “created or saved” the most jobs, the average cost is about 70,000.

Now, some states have done better – 17,000 per job in Vermont for example. But all this means is, as the numbers of jobs “saved” get higher, the cost per job rockets.

And US debt?

Which would be why people are looking elsewhere for their government debt purchases.

Mr English was confident New Zealand would have no trouble raising the debt, though it would be paying a fair amount for it.

At least two potential sources were big investment funds trying to diversify away from United States debt, and the fact that other countries rates were so low made New Zealand look good – 5.5 per cent on a 10-year Government bond looked attractive.

Bill and John were harshly criticised by the left for not copying the US and UK. But I guess with the top 2 guys with good financial knowledge, they understood that if you take millions out of the economy and spend it on projects determined by politicans, you’re going to cut the productivity of that money. If you borrow it instead, you have to compete for scarce dollars, high interest rates and still don’t get much bang for the buck.

So they just made a few tweaks, bought some spending forward, and avoided the “think big” schemes.

Now, we’re recovering and they’re not, we’re in good shape debt-wise, and they’re mortgaging the next few generations.

Lucky us, not so good for them.

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