What I Learned Today

25th August 2009

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Cash for ___________ [insert floundering industry here]

The cash for clunkers program ended last night and I have to say, I’m not quite sure what I think about it. In one way, it’s very strategic – which I like. When something needs a boost, you offer a promotion. A “timely, targeted and temporary” as well as “speedy, substantial and sustained” incentive, as Larry Summers so alliteratively put it. It certainly helped the automakers - they just about doubled production from the second quarter. Not to mention the dealers, scrapyards, and other auto industry constituents. For now, at least.

On the other hand, it’s very manipulative – which I don’t like. It plays upon “behavioral economics,” that is, the straying from rational economic behavior. The government is like a car salesman in those cheesy commercials, but on the grandest scale. (Aside: Has anyone made a spoof with Obama, a car salesman, on the lot yelling, “Our first rebates were used in a week, so we decided to do it again!! Buy now and get a $3,500 voucher! Get yours before these rebates go OUT THE DOOR!!”) And, as any good sales promotion would, it worked. In fact, it turns out that potentially 40% of the 635,186 cars sold were to people that did not initially WANT a new car and wouldn’t have purchased one this calendar year, but  just fell into the trap.  That’s per the National Automobile Dealers Association economist Paul Taylor. Talk about irrational behavior. Even more interesting is the promotion attracted those that didn’t even qualify for the rebate, but bought cars anyway. GM spokesperson John McDonald says GM estimates 30% of its sales fall into this category.

Anyway, the program appears to have worked to bring a short term stimulus to the auto industry. What that will mean for future auto demand, for used car dealerships, and for the budget balancing of the 635,186 Americans that participated in the program, I do not know. Next up: cash for appliances.

12th August 2009

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Okay, Big Brother

“If you get an email or see something on the web about health insurance reform that seems fishy, send it to flag@whitehouse.gov.”

4th August 2009

Post with 11 notes

Dollars for Dry Cleaning, Money for Music

Best piece I read today, from Dennis Gartman.

“OUR SUITS ARE GETTING OLD; AND OUR SHIRTS ARE A BIT TATTY: We are here this morning to propose the newest stimulus program: Dollars for Dry Cleaning; Looking in our closet over the weekend we noticed that several of our white shirts were a bit tatty, and that several of our suits were well worn, and that a number of favourite trousers were frayed at the cuffs. Noting further that the nation’s textile industry is having a bit of a tough time of it, we are this morning proposing Dollars for Dry Cleaning: a stimulus program that would allow the nation’s men and women to turn in old clothes that are not longer serviceable… a decision which shall be administered by the newly constituted Clothes Destruction Czar… and for those clothes to be given a rebate from Washington that can then be used to buy new suits, new shirts and new trousers. Presto, the nation’s clothing and textile’s industries are restored to health; unemployment is reduced; good and wonderfully serviceable headlines for the Administration are produced Prêt-à-Porter.

But why stop there? What about Dollars for Drivers? Our old Taylor Made driver is behind the times. It’s getting a bit old; the face is a bit worn; it needs a new grip. And we are certain that the golf industry is suffering a setback in the current economic environment and could use a bit of stimulus. So why can’t we all turn in our old drivers for shiny new ones, be given a rebate for the old, size challenged one to be used to buy the newest of golf technology, with faroff Washington paying for it? Come’on; we really, really, really want a new driver, and shouldn’t Washington shoulder some of the money for it? Ain’t it reasonable? Ain’t it economic wisdom?

And what about our collection of old vinyl records? Aren’t they out of date and shouldn’t we be allowed to replace them with a new IPod. Shouldn’t tax payers be willing and ready to grant us a stimulus program to replace our old records with new technology, and wouldn’t Apple do well with this sort of new program, and wouldn’t the new age musicians fare better. So, sure, shouldn’t we be allowed to turn in our records for new technology under the Money for Music stimulus program? Makes sense, right?

And why stop there? Why should the nation’s policemen and women suffer the indignity of eating day-old donuts? Let’s have a  bakery stimulus program to turn in day-old donuts for nice, fresh ones: Dollars for Donuts. That would stimulate the baking industry; it would increase the off-take of wheat and cooking oil helping the farm community along the way. The nation’s police forces would be well served. Where’s the downside? We see none. Dollars for Donuts it is then.

How about Gold for Grass? Shouldn’t the government want us all to have nice lawns? Wouldn’t the lawn care industry do well if Washington gave us money to tear out our poor, crabgrass laden lawns and replant them with new genetically engineered seeds, requiring new equipment, and putting legal and illegal labour back to work in the process?

We heard that things are so bad that even the legalized prostitution industry in Las Vegas is under pressure. So why don’t the Ladies of the Evening demand a “stimulus” program of their own: Pennies for… Well, ya’ll get the idea, right?.

And what about our old car? Shouldn’t the government be willing to pay us to bring in some old junker, give us taxpayer money to do so and then give us a tax incentive to buy a new car in order to help Detroit escape from the myriad errors of its own ways? Wouldn’t that make economic sense? Oh, wait, they’ve already done that! Golly, these guys are good, ain’t they?”