Image by Beth Rooney
“Cash for Clunkers” Not Much Help
Although the U.S. government’s “cash for clunkers” program boosted car sales while it lasted, it did not bring new buyers into the market, according to research by Amir Sufi, associate professor of finance, and Atif Mian. In “The Effects of Fiscal Stimulus: Evidence from the 2009 ‘Cash for Clunkers’ Program,” they note that for two months in the summer of 2009, about 360,000 car owners took advantage of the chance to trade in an old car that met certain standards for a credit of $3,500 to $4,500 toward the purchase of a new car.
But, Sufi and Mian found, car sales dropped off by the same amount in the months that followed. White House economists contend the project succeeded in stimulating aggregate demand. But Sufi and Mian found “no evidence of an effect on employment, house prices, or household default rates in cities with higher exposure to the program.”
The researchers caution their findings “do not warrant the claim that all forms of fiscal stimulus fail to boost long-run economic output.” A Wall Street Journal editorial cited the work in questioning the merits of the Obama stimulus programs.—P.H.