We asked our panel:
Should congress refuel the stalling "cash-for-clunkers" program?
Watch "The Kudlow Report" tonight at 7pm ET and find out what out caucus members have to say about the "cash-for-clunkers" program.
We asked our panel:
The Kudlow Caucus Breakdown
Market Strategist, Stifel Nicolaus
This program demonstrates cash in the hands of consumers is the best stimulus around, so why not cut everyone's taxes (cash to consumers) instead and help all sectors of the economy not just the auto industry.
Jerry Bowyer Chief Economist, Benchmark Financial Network
But it has already done America quite a bit of good. On the cusp of health care nationalization the Clunker Legislation has reminded us just how incompetent central planners are at, well...central planning. Clunkers pile up in front of scrap yards that don't want them, while the checks are trapped in a maze of red tape. Imagine if those were our actual living bodies and not our old cars placed under government management???
It's a wildly popular, hugely successful government program that has helped car makers. Auto companies reported their best month in almost a year and Ford posted its first monthly sales increase in two years. What's not to like?
It also shows that government programs do work, like the TARP, which is being repaid to the Treasury, and the recovery package, both of which have helped to grow the GDP and rally the stock markets.
Vince Farrell Scotsman Capital Management
Here is a relatively small stimulus plan that has been embraced by the market and provides the best bang for the buck of anything that has come out of Congress so far. Surveys show that for every 100 cars sold under the clunker program another 40 get sold because of increased traffic in the showroom. Auto inventories are depleted and this will prod an increase in production and create jobs.
CARS is another transfer payment with no meaningful and enduring multiplier effect. While the program will modestly raise both consumer confidence and insure a boost to third-quarter 2009 GDP growth, it is small in scale relative to the size of our economy and is not contributing to a self-sustaining recovery. Indeed, the beneficiaries are mainly foreign automobile manufacturers and the program may be "borrowing" from car sales for next year - setting the stage for a possible double dip.
Like Bastiat's "broken window fallacy” we are simply destroying old cars and replacing them with new ones without stopping to consider the opportunity cost of capital.
And I suspect the "real cost" is far in excess of $4,500/automobile. There is simply too much effort involved for what we are receiving - popular with a select group of consumer and politicians that are elected by those consumers!
Jim LaCamp Portfolio Manager, Portfolio Focus, RBC Wealth Management
Co-Host, Opening Bell Radio Show, Biz Radio Network
Although this program makes far more sense than most of the programs like crap and trade, and the healthcare bill, the money from this program doesn't come from the tooth fairy. It comes from taxpayers. Enough.
Chief Investment Officer, Laffer Investments
They never should have done the program in the first place and they should not extend it. Sure people are buying cars—they’re being given “free” money. But there is no tooth fairy; that money has to come from other workers and producers in the form of higher taxes now or in the future.
This whole notion of cash for clunkers is just the 1930s make-work projects all over again. It’s digging ditches and filling them up again, except this time it’s even worse—it’s destroying good things and forcing people to rebuild them. If cash for clunkers is such a good idea, they should destroy every single car in America and then never do it again so that all of the auto companies would be fully producing cars. Certainly auto production would be off the charts, but do you think we’d be better off? Not in the least. We’d be at full employment with everyone walking back and forth to work.
I am not in favor of Keynesian stimulus, and even less in favor or subsidies, or industrial policy of any sort. However, apparently this program is working. It ran out of money because it was so popular. And if there is any hope whatsoever for Keynesian stimulus, it is in an area where resources are truly idle, and they are truly idle in the auto industry.
Steve Moore Sr. Economics Writer, The Wall Street Journal Editorial Board
I want to trade in my clunker for $3k but I think the program is very stupid. We are simply dumping cars into the bottom of the ocean and then building new cars. This is broken windows economics. I am against the program and think it is a huge waste of money.
Money & Politics Columnist
All the plan does is bring forward sales from the near future. It creates no net or sustainable jobs or sales. Plus we have to borrow the money. Plus it is another example of Obama industrial policy. All paint job and no engine. It is Obamanomics in microcosm.
The New Republic
I like the idea behind the program--I like the fact that it’s fast-acting stimulus, and that it has real environmental benefits. But there seems to be something screwy—or at least mildly suspicious—going on with the numbers. As the University of Chicago’s Steve Levitt points out, the original $1 billion allocation was enough to fund subsidies for 250,000 clunkers. In 2006, before the auto industry took a nosedive, average weekly auto sales in the United States were 125,000 (again according to Levitt). It’s hard to believe we’ve blown through all that cash so quickly – not impossible, but hard to believe. I’d like Congress to get a handle on what’s going on before it allocates more money.
CEO, Patriarch Partners
In the realm of recent government spending, these funds, in contrast to others, demonstrate the true power of stimulus. Cash-for clunkers has inspired consumer spending, increased car production helping to support flailing suppliers and dealers while simultaneously supporting energy saving objectives.