By Ryan Young
A new NBER working paper from Atif Mia and Amir Sufi finds that the Cash-for-Clunkers program didn’t work. Here’s part of the abstract:
We find that the program induced the purchase of an additional 360,000 cars in July and August of 2009. However, almost all of the additional purchases under the program were pulled forward from the very near future; the effect of the program on auto purchases is almost completely reversed by as early as March 2010 – only seven months after the program ended. The effect of the program on auto purchases was significantly more short-lived than previously suggested. We also find no evidence of an effect on employment, house prices, or household default rates in cities with higher exposure to the program.
In other words, cash for clunkers didn’t change how much people spent. It only changed when they spent. Sales were higher than normal during the program, and lower than normal after.
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As the data come in, they are proving what theory predicts: fiscal stimulus doesn’t work. President George W. Bush tried Keynesian stimulus in 2001. It didn’t work. He tried again in 2003. It didn’t work then, either. President Obama’s stimulus programs aren’t faring any better. It’s time for a different approach.