Where Did We Go Wrong? NADA Uncovers 200,000 Pending Claims In Cash For Clunkers Program!

Just wait until the same people at the DMV are in charge of (rationing)your government provided health insurance.

I can't wait. the current system is a joke set up to rob american people blind just so a few greedy CEOs live like kings. one american goes bankrupt every 30 seconds because of health care, 400 die every week.

besides, the gov. already runs the best health care system in the country: VA

Those who waited, ignored all those silly same ol' promotions, got the best deal.
The wives had their husbands' old beloved car out of the house and a brand new car with enough money to go on a shopping spree! :P

Seriously though, congratulations on the success. I thought many people wouldn't even know about it... I thought people would think it was too complicated... I thought this whole thing was gonna be a big laugh, but I was wrong.

How about where did we go so right???!! A govt program that worked so freakin well, it needs to be extended so that more people can benefit!!! woo hoo!!

Worked too well. They can't process them fast enough so they under report the totals for first two days then when another interest group does the homework for them they discover a mountain of issues.

Poor process control.

Let's be realistic, it's still the bureaucratic govt we're talking about. There will always be processing issues. That's a pretty small blip in an otherwise stunning success.

Have we found those WMDs yet?

LOL, I think they are still looking!

This certainly gives some credence to the proposal that ALL of the auto industry bailout money should have been given to BUYERS not manufacturers. Buyers would have jump started the industry much more efficiently AND at the same time increased the ave MPG of our national fleet.

If Obama and his crony misfits can't run Cash for Clunkers then how are they going to run Obama's Commie Healthcare?

Congress just voted late this morning to add an additional 2 billion dollars to the program. So calm down everyone. All is well.

All is well? This makes a bad situation worse. We should NOT be dependent on Government handouts to purchase vehicles. Bad decissions are being made and bad decissions are being made to fix the first bad decission.

shut the hell up already you brainwashed morons. during an economic disaster the governemnt is the ONLY thing we have to depend on. the private sector is dead right now.

It's awesome that they trippled the CARS money. This is big in helping jump start the car market again.

The private sector is dead because of current government policy.

no, the private sector is dead because of 30 years of retarded "small government" Reaganomics that have nearly destroyed the American middle class- the backbone of this country.

We need a strong government like we did back in 1940-1960's- when USA developed a strong middle class and became the #1 superpower.

Conservatism= failure

DinamoR and Badgewhore,,,,, Why are you so willing to be a Government Puppet??? And "Good Job Barack" Your kidding right?

I wonder how many of these sales were to dealerships cashing in on cheap cars...

yeah, we inherited the trillion dollar deficits from the idiot you voted for. you know, the moron who said "deficits don't matter", then cut taxes and increased spending doubling our debt in 8 years from $5,5 trillion to $11 trillion

obama 2012:-)

Hmm, I am sure the president and the democrats aren't the only ones who support this. I think it is a great idea. Look at all the money Bush wasted on stupid _ss crap that wasn't on our own soil and only benefited his friends. Get real.

Autospies is beginning to remind me of the Star or Enquirer. Just look at the photo Agent009 chose to post up of Obama. How can we even take this stuff for real anymore?

I would hesitate, despite the interest in the program, to blatantly call it a success. The truth is a little more complicated than that. That complication is the result of the fact that money has alternative uses, and the fact that the money to pay for the program was garnered through taxation.

Taxation destroys social welfare. That is not something the conservatives have invented as a way to complain; it is actually basic economics of the sort everyone should learn in high school. When a government taxes they destroy value in the market in excess of the value of taxation. Economists refer to this as the social loss, or deadweight loss of taxation. So there is a hidden cost to a program like this. This is easily calculable as a geometric area for simple economic systems or with integral calculus for curved supply demand curves (specifically the integral of demand minus supply from Q0 to Q1). The exact value depends on the elasticity of supply and demand and other parameters, but it is easy to perform an order of magnitude calculation. If you take our 1,000,000,000.00, which was the result of taxation and assume that supply and demand are at 45° to horizontal- and thus 90 degrees to each other, you can easily calculate the deadweight loss as $500,000,000 *Sqrt(2) or $707 million dollars. That is what society is poorer by in addition to the $1 billion out of their pockets. This is simply meant to point to the order of magnitude.

I must point out, though, that this problem is not unique to the CARS program. What I mean by that is that the government could have spent the money elsewhere and the deadweight loss would still exist and is a hidden cost to those programs. The only way there is an impact is if that money was never taxed- once that happens it is effectively a sunk cost.

How is Society Poorer by $707 million if the money is still there, just redistributed? Even the inefficiencies in the system are paying wages so it's really just forcing redistribution of money. When the economy slows down, it isn't because money disappears, it's because the people stop spending, and the overall money transfer rate slows down. I am not an economist, so if you could explain what you mean by society being poorer that would help greatly.

"How is Society Poorer by $707 million if the money is still there, just redistributed?"

I completely understand what you are driving at and had a similar reservation as well: that is called a zero-Sum fallacy, and believe it or not even though money changes hands, economics is not a zero-sum game. First I would like to point out that actualy physical money does not necessarily represent actual value or utility. Those who posit that the wealthy are such at the expense of the poor are making a very similar mistake. The reason there is a deadweight loss has to do with markets equilibrating to a sub-optimal point; a point that is less efficient and productive. Even when the government taxes and spends it, they do not (and some people argue cannot) solve the economic calculation problem. Visually, when the market equilibrates with the tax, it creates a triangle with the former equilibrium point that is quite literally destroyed by the tax. There is another thing that I want to point out, a subsidy such as what the CARS program really is , has its own deadweight loss, in addition to the tax deadweight loss. My statement that the money could be spent on anything else and you wouldn't get around the tax deadweight loss is correct, that is not necessarily true of a subsidy deadweight loss.

I would like to point out that I made an assumption in my calculation that really is a of a dubious nature: the deadweight loss should be around $200 million or so: $700 million is really too high except under exceptional circumstances (it could happen- but it isn't likely).

I'm still not sure about your explanation. I am used to an energy in=energy out kind of problems. What processes lose and gain cash? The only ones I can think of are the physical destruction and printing of money. A close second may be with money being drained or gained from other countries. If the us government is printing money to pay for these programs (vs using taxes) then yes I entirely agree that it's making everyone poorer (except the people who end up with their share of it).

The money that is taxed results in total system sub-optimality- that money is no longer allowed to be optimally productive, and as a result there is an opportunity cost. That is the general gist of it.

To quote Fred Foldvary:

"Even a relatively flat income tax imposes what economists call a “deadweight loss” or “excess burden” on society. Taxes on productive activity increase the price of labor or goods beyond economic costs, and so reduce the quantity provided. This reduction in production, income, and investment is a misallocation of resources. Resources are wasted because they do not go to where they are most wanted."

It is very rare that taxes do not create deadweight losses. Although Mr. Foldvary argues that land value or rent based taxation, which is not be be confused with real property taxes, is an excellent form of taxation in this regard.

Interestingly, this is the type of taxation that several of the founding fathers felt most amenable to. Thomas Jefferson suggested “a land tax supply the means by which the individual States were to contribute their quotas of revenue to the Federal Government.” (1797) Thomas Paine expressed some similar views. They believed this because it is the rational/logical solution: i.e. it is the thing that is most related to the execution of the duties of the government (in the form of defense notably- the more land you own the more you have to defend). Although it would not be recognized in last century of anti-intellectualism in this country, but it should be of no surprise that the purely logical and homogeneous solution is the most efficient. Something that has consequences for (false) arguments to the middle...but I don't care to go on the tangent.

Oh ok, I understand where you are coming from now. That makes sense, but I now propose the question to you. During times of a recession when people tend to be more cautious about spending wouldn't a larger deadweight loss be in effect due to the reduction in production and income? A government program like this encourages many more billions to be spent in the marketplace. So wouldn't the deadweight effect actually be negative? Where for every dollar in this program an extra $5 is becoming productive? So even if it ties up the money for a short period of time it will cancel that effect out by freeing up much larger amounts of money.

No. First, a recession is not some random shock with no reason: it is a market correction. A deadweight loss doesn't change based on what happens in the periods before. There is a single optimality within any period and while the rate of rise of the optimality may be dropping (i.e. you have a recession), that does not change at all the distortionary effects of a deadweight loss. While this program may promote spending (which is not necessarily a good thing- despite what some half-wit government official on CNBC woudl have you believe) the fact is there is a deadweight loss of the taxation to acquire the money, and the subsidy utilized in the program, and that these are lost.

But if people aren't spending or investing money, then it's staying stagnant. And you aren't making any money with it. How I am picturing the deadweight loss you are describing is you are losing money by losing out on the opportunity to make money. If all this money is sitting in banks not being invested into the economy then doesn't that mean it is losing out on it's potential to increase production and income much the same way that letting the government tie up your money does?

You have a pretty good concept of it, but I think you are focusing on the individual too much- it is a misallocation of resources across entire markets. Savings is not necessarily unproductive money, it is money that is put there in order to hedge, if you will, against some form of risk. Savings expands the capital pool, lowers the cost of capital, and pushes interest rates down. Because it does not go into producing things does not make it unproductive or useless. A recession does not mean that the market is producing sub-optimally either and it isn't a distortion: what created it was the distortion. Promoting car purchases with money that was taxed and then used as a subsidy may promote spending money, but that money were it never taxed would have more utility and would be used in a manner more in line with their needs- which may very well include savings. In addition, whatever value it creates, would have to exceed the taxed value and the deadweight loss due to the tax and the deadweight loss due to the subsidy.

I agree that it is a misallocation of resources as it wouldn't have been spent that way if it hadn't been forced. But I still do not see how society is poorer by $1.2 billion. That statement would imply that the $1 billion dollars and whatever interest/development it could have made is disappearing in thin air. It's merely being artificially spread into other markets where they shall see increased production/incomes etc.

At the end of the day I see it as this. The current administrations solution managed to up the national fuel economy average, spur further growth and development in the automotive industry creating jobs and if you believe in it... "helping save the environment".

I understand what you are saying, and I won't argue policy with you. The thing that bothers me is that rarely do people ask about the true cost of a policy. That true cost must take into account that money has alternative uses. Deadweight loses (of both taxation and subsidies in this case: so actualyl around $400 million) should be charged against this policy when analyzing its effectiveness.

To be sure, there are actually instances where the deadweight loss has exceeded the amount of money garnered through taxation. I am pretty sure this is not an instance like that, but it does happen. Without actually performing the analysis- you don't know though.

Oh, society isn't out the $1 billion- they are out the deadweight losses- or around 400 million as a guess- although it could be much higher. The tax itself isn't lost (its out of the peoples' pocket, but isn't "lost" in the sense of destroyed such as is the case with the deadweight loss).

lol no, he is pro gun and hates the cops, we don't want him, and he isn't Canadian :P

Obama has to spend that trillion to save us from the second great depression. and he already has. stock market is up 50% since march.

higher debt is the price of dealing with such an economic disaster. but at least we'll have something to show for that money- a country that is back on track.

after republicans spend trillions we were in a free fall.

conservatism= failure

Obama 2012: -)

Good job Barack! I least this coming 8 years we get a great president like Barack, which is a welcomed changed from the moron Bush.