Home Blogs Chemicals and the Economy ‘Cash for clunkers’ a waste of money

‘Cash for clunkers’ a waste of money

Chemical companies, Consumer demand, Economic growth
By Paul Hodges on 23-Sep-2010

silicate.jpgLast year, the US administration spent $2.85bn on supporting the sale of 360k autos, by paying owners of older vehicles to destroy them with sodium silicate.

At the time, most people in the chemical industry, and many experts, regarded this ‘cash for clunkers’ programme as being a complete waste of money. And they became even more concerned when European governments followed with similar programmes.

Now a new study for the US National Bureau of Economic Research finds that it “had no long run effect on auto purchases“. Their analysis suggests it increased sales by 360k in summer last year, “but then quickly hurt sales by about the same amount, in effect stealing sales from the future“.

Of course, they can’t also measure the negative impact on chemical companies and converters of suddenly having to ramp up production, only to then see it collapse again. But this clearly happened, causing major disruption to the supply chain. Equally, all the anecdotal evidence suggests the same pattern occurred in Europe.

The underlying problem is that many politicians simply fail to accept that short-term fixes, such as the clunkers programmes, housing tax credits etc, cannot provide ‘escape velocity’ to overcome the real issues underlying the current Crisis. Vast sums of money, and time, are being wasted whilst they remain in this state of denial, as the blog will discuss in more detail at the weekend