Calculated Risk has a smart bit of economic analysis on the real cost to taxpayers of the Cash for Clunkers and housing-credit subsidies—calculations I haven’t seen anywhere else.
CR notes that the real economic benefits of the subsidies come only from the sales they spur over and above what would have occurred without them. Some lucky folks who were going to buy anyway will happily snap up the cash but they’re a wash. It’s impossible to determine these number for sure, but you can get a pretty good estimate by looking at previous months’ data.
For August, CR estimates Cash for Clunkers prodded an additional 320,000 car sales and calculates that the “cost to taxpayers per additional car sold” at $7,200. That looks a lot worse than the $4,170 per car number put out by the government.
Home sales are far worse:
With 1.9 million first-time buyers, the total cost of the tax credit will be $15.2 billion. Divide $15.2 billion by 350 thousand (CJR: the number of additional buyers), and the program cost $43.4 thousand per additional buyer.
Excellent work.
The press ought to learn from CR here and include this kind of analysis in its stories on these credits.
I won’t hold my breath.
UPDATE: By popular request (er, demand), here’s my follow-up post looking at the benefits of Cash for Clunkers.
Ryan, good column. I haven't seen this take elsewhere. Instead, reporters have been amazed at how popular a 'hey, have some free money' program has been. Who knew?
#1 Posted by Mark Richard, CJR on Wed 2 Sep 2009 at 12:26 PM
What's so great about that calculation? How much did various governments (federal, state, city) take in in taxes (sales tax, import duties), how much money didn't have to be paid out for unemployment insurance or personal bankruptcy bail-outs, and how much money will be saved in importing oil for cars which burn less fuel?
#2 Posted by Michael S. Cullen, CJR on Thu 3 Sep 2009 at 02:37 AM
I agree that the calculations are mildly interesting, but what's the point? Wouldn't the prospective beneficiaries have preferred a program under which the government provided free cars and free houses to people? Certainly, the government seems to be a piker when it comes to programs that help ordinary folks, but pulls out all the stops to help idiots on Wall Street. What is real cost of bailouts to financial firms and, more important, what are the returns?
#3 Posted by Mark Standish, CJR on Thu 3 Sep 2009 at 06:43 AM
Michael, see my follow-up.
#4 Posted by Ryan Chittum, CJR on Thu 3 Sep 2009 at 01:55 PM