Welcome to Caracas: White House Blasts Edmunds.com for Criticizing Cash-for-Clunkers Program... Again

Last October, the White House "went to war" with famed auto website Edmunds.com, claiming that it had unfairly tarred its "Cash-for-Clunkers" program. Now that the controversy over its bizarre spending program has faded, the White House has decided to take another potshot at the respected service provider.

With seven months of post-Clunkers sales data in hand (September 2009 through March 2010; see dark blue line in figure), now seems a good time for a reckoning.

The 'short-term pull-forward' view was perhaps most vigorously articulated by automotive industry website Edmunds.com. In late October, Edmunds.com made a widely-reported forecast for the pace of sales in the last quarter of the year: According to Edmunds, light motor vehicle sales in November and December would be only about 10.5 million at an annual rate (the dashed blue line in the figure). Edmunds furthermore argued that, had the CARS program not existed, the pace of sales would have been higher, about 10.8 million, during those two months (the dashed red line in the figure).

This afternoon, Edmunds fired back.

"One has to wonder why the White House continues to feel the need to defend a program that is no longer being debated," observed Edmunds.com CEO Jeremy Anwyl. "Trying to add a spin to old news seems pointless when there are more pressing issues for the government to address." [Ed: ouch.]

1. The White House seems to have missed the simple point that car sales were beginning to recover before the Cash for Clunkers program was introduced. Even the program’s proponents would have to agree that it was too little, too late.

2. A properly designed Keynesian stimulus is structured to stimulate the market for 12 to 18 months, providing support while the economy recovers. Cash for Clunkers created an unhealthy spike, distorting the marketplace by suddenly generating about 125,000 incremental new car sales and pulling ahead hundreds of thousands more.

3. Independent economists generally agree with Edmunds.com’s analysis of the program. For example, on November 2, Freakonomics author Steven Levitt blogged about the topic for nytimes.com “Cash for Clunkers mostly just turned out to be a gift from the government to people who happened to be in the market for a new car at the right time... It is relatively easy to move around the timing of when someone purchases a durable good, but much harder to affect whether they buy a durable good or not."

4. Relatively strong March car sales, which the government specifically celebrates in its report, were artificially stimulated by remarkable incentives programs initiated by Toyota in attempt to deal with its well-publicized woes. March sales were an aberration.

5. The government reports that in the months since Cash for Clunkers, the average Seasonally Adjusted Annual Rate (SAAR) has been 10.7 million car sales. However, if you eliminate data from December and March – two months when consumers believed they could get unusually good deals on new cars – the average SAAR drops to only 10.3 million. Today’s car sales are still abysmally low by historical standards.

Yesterday, Columbia, Missouri's KOMU-TV offered a real world, feet-on-the-street view that confirms Edmunds' assessment.

Used car dealers want to sell cheap cars to drivers who need them. The only problem is there aren't any around... The Cash for Clunkers program took over 700,000 gas guzzlers off the streets. Many of those cars would have ended up at on used car lots.

"What it does is that it drives up the value of the used vehicles that are left out there," Tambke Autos' Sales Manager Joe Merkle said. "It drives them up so high that they're almost not afforable anymore..."

...Lucas Wren says it is disappointing that they can't cater to drivers looking for affordable transportation... And with it being tax refund season, he said he sees more drivers desperate for cheap transportation.

"(They) have just gotten their income tax check and have about a thousand bucks left over and really need a car to get from point a to point b to continue to make money and they dont have anything," Wren said. "We feel defenseless almost because it was something that we used to be able to offer to everybody."

Edmunds' chief executive also added an astute observation.

"This White House report conveniently avoids an accounting of the program's costs. For example, new and used car prices were wildly inflated during the program, which especially hurt the car-shoppers who didn’t have a qualifying ‘clunker,’” noted Anwyl. “And what about the costs to the beleaguered taxpayer?”

What, indeed?

Why in the world does the White House -- which possesses the biggest bully pulpit in the world -- feel compelled to attack Edmunds.com, Fox News, Jake Tapper, Rush Limbaugh, Sean Hannity and anyone else who dares to oppose its extreme policy positions?

That's a rhetorical question, Señor Chavez. Welcome to Venezuela.


Hat tip: W.