The Obama administration and a prominent automotive website are locked in a war of words over the effectiveness of the Cash for Clunkers program.
The Detroit News reports, "The White House said the influential automotive news Web site Edmunds.com's harsh analysis of the impact of ‘Cash for Clunkers' was ‘faulty' and ‘implausible.' Edmunds CEO Jeremy Anwyl shot back that the White House was ‘shooting the messenger.'"
The argument began when the website published an analysis arguing that the program had been far less effective than the White House has claimed. CNN Money reports that Edmunds estimates "A total of 690,000 new vehicles were sold under the Cash for Clunkers program last summer, but only 125,000 of those were vehicles that would not have been sold anyway." Other sales would have occurred without the program, though they may have occurred gradually over several months instead of all packed into a few weeks in July and August.
The average rebate given under the program was $4,000, according to the White House. However, Edmunds argues, the average should be calculated using only the sales that the web site estimates can be credited solely to the program; sales that would have happened without the government rebate shouldn't be included in the calculation. By that standard, CNN notes, "the government ended up spending about $24,000 each for those 125,000 additional vehicle sales."
The administration quickly fired back. In a posting on the official White House blog, White House Director of New Media Macon Phillips wrote, "This is the latest of several critical ‘analyses' of the Cash for Clunkers program from Edmunds.com, which appear designed to grab headlines and get coverage on cable TV." The White House argues that Cash for Clunkers drew buyers into dealerships who didn't qualify for the rebate, boosting auto sales well beyond the 125,000 cars Edmunds assumes were affected by the program. That helped to boost consumer confidence and get people spending money again.
Even if Cash for Clunkers succeeded only in getting some people to buy in August who might have otherwise bought in the fall, administration officials say, that can be counted as a success, White House economist Jared Bernstein told Fox News, "I'm sure that some of those sales were pulled forward - maybe a quarter, maybe 6 months, maybe a year. And that's okay, especially when you look at today's GDP report where we are posting positive growth and where consumer durables including autos is a big contributor," he said. "We really need that growth now. Pulling sales forward is actually helpful."
On the White House blog, Phillips argued that the program also helped clear a backlog of unsold cars, causing automakers to resume production and "helping boost our economy and create jobs now when we need it most."
Edmunds responded, arguing that the idea that Cash for Clunkers lured new car buyers who didn't qualify for the rebate is "a claim that has been widely supported by anecdote but by little analysis." Automakers' move to boost production, they claimed, is a sign that "the economy is recovering accompanied by improved car sales," not a result of the program.
Others in the industry have rushed to the program's defense. Mike Jackson, CEO of AutoNation, America's largest dealership chain, told the Detroit Free Press, "Simply put, [Edmunds] misrepresented the facts, and the White House is completely justified in calling them out on it."
Ford Sales Analyst George Pipas told CNN that Edmunds' analysis "misses the point. The whole purpose of the program was to provide some kind of catalyst to kick-start the economy," he said, "and by all accounts the extra production that was added this year was a boost to the economy."
Autoblog, meanwhile, writes, "While we're not entirely sure C4C was a great idea, it's hard to argue that it spurred desperately needed economic activity."
If you're in the market for a new car, check out the U.S. News rankings of this year's best cars as well as this month's best car deals.
