patrick.net

Fuck cash for clunkers.

It's now time for cash for DUMPS!

I don't mean to highjack, I have nothing to contribute vis the Keynes angles.

But I know about the unintended consequences of these arrogant megalomaniacs actions in the back street, the one over behind Main Street.
One man's Auto Industry Stimulus is another man's only viable option for transportation.
This crooked giveaway to the corporate elite decimated the used car market in America and hugely impacted the supply of used auto parts. (destroyed "clunkers" were not allowed to be parts salvaged. Why?)
With their disregard for anyone who might have to shop for, and drive, a used car, our elected leaders once again prove who their real constituency is.

Robert Sproul says

decimated the used car market in America and hugely impacted the supply of used auto parts. (destroyed "clunkers" were not allowed to be parts salvaged. Why?)

Wouldn't not allowing those parts to be salvaged force more parts to be made and sold, shipped, etc? That would be the stimulus you'd think we all would need, despite that damage to the used car supplies.

In any case, used car shoppers could still buy used cars from private sellers. And not every trade-in was a C4C transaction. I believe you, but I guess we'd need to see how many were actually impacted versus the whole used car market, right?

RE: Keynes. I think, just as you could argue that interest rates hurt savers and the elderly, at that point stimulating consumption, particularly manufacturing, seems like it would pay dividends, even if the car market was neutral at best.

CL says

Wouldn't not allowing those parts to be salvaged force more parts to be made and sold, shipped, etc? That would be the stimulus you'd think we all would need, despite that damage to the used car supplies.

Not everybody needs "stimulus" some people, poor people, need used car parts to keep their hoopties running.
CL says

In any case, used car shoppers could still buy used cars from private sellers.

C4C took almost 700,000 cars out of the used car supply, making good used cars more expensive. Hurting poor people.
CL says

interest rates hurt savers and the elderly, at that point stimulating consumption, particularly manufacturing, seems like it would pay dividends,

Yup, financial repression hurts savers and the elderly, driving some into poverty. Stimulating consumption does not make that up to them. They stay screwed.
The pattern is; take from the poor and give to the rich.
The Wizard of Oz, educated-past-their-intelligence, self-dealing elites making these decisions don't care, and don't have to care, about the poor or the elderly.
You play into their hand when you try to parse their decisions based on correct or not correct, smart or not smart. They are uncaring, they are unjust, they are corrupt, who cares if they are smart.

But underconsumption DOES hurt them. Even the poor get affected by the complete collapse of the system. I understand your point, but if you look at how devastating the collapse was, its effect on charities even, or the wealth effect and its impact on personal charity, then can you say that? Like it or not, the symptom and the cause of the post-collapse period was aggregate demand, right? Factories need to build and employ, lest the employees become the next poor as well. We needed to restore confidence enough to get citizens buying things again.

It's just a symptom of how terribly they fucked up, and how dependent we are on consumerism. Conversely, the poor could maintain their jalopies but that seems like a recipe for stasis at a time when stasis would have been terrible.

Robert Sproul says

(destroyed "clunkers" were not allowed to be parts salvaged. Why?)

Because the point of destroying the clunkers was to remove older fuel inefficient vehicles from the roads forever. Allowing those parts to be used to repair other fuel inefficient vehicles defeated the purpose of the program.

Or so I was told when I called.

New Renter says

Robert Sproul says

(destroyed "clunkers" were not allowed to be parts salvaged. Why?)

Because the point of destroying the clunkers was to remove older fuel inefficient vehicles from the roads forever. Allowing those parts to be used to repair other fuel inefficient vehicles defeated the purpose of the program.

Or so I was told when I called.

And in a Keynesian sense, better to make parts and buy or melt metal than to reuse already built parts. They could have just melted and formed new parts over and over again and it would have been stimulative.

CL says

And in a Keynesian sense, better to make parts and buy or melt metal than to reuse already built parts.

I think it's a mistake to over-Keynesian this. Keynesian doesn't have to mean waste; the money we could haves aved economizing keeping used cars on the road could have be deployed to other usages of wealth that produced jobs instead, like new investments in mass transit.

Cash for clunkers was done because it was easy stimulus and some lobbyists got it into law, and as mentioned above had the benefit of increasing fleet fuel economy, something liberals are for and conservatives are against.

CL says

Is some stimulus better than others in a macro sense?

I just look at things based on the "paycheck economy".

buying power is based on money, and money is generally based on income, until one reaches retirement age and the consumer is dependent on savings.

http://www.politifact.com/truth-o-meter/statements/2012/jul/31/bernie-s/sanders-says-walmart-heirs-own-more-wealth-bottom-/

40% of this country barely has a pot to piss in. It doesn't have to be this way, but we have to somehow repair local economies such that money remains within the paycheck economy longer.

Here where I live, we have real estate investors buying up all the properties, both SFH and MFH. The rents then get sucked out of the economy, off to the bay area or LA and then who knows where.

The apartment I was living until recently was sold, and per the county I see the buyer has a Boston address. That's millions of dollars now leaving the Sunnyvale economy. Of course, it can probably handle it given all the investment money flowing into it, and the high wages that a lot of people enjoy there.

Bellingham Bill says

CL says

And in a Keynesian sense, better to make parts and buy or melt metal than to reuse already built parts.

I think it's a mistake to over-Keynesian this. Keynesian doesn't have to mean waste; the money we could haves aved economizing keeping used cars on the road could have be deployed to other usages of wealth that produced jobs instead, like new investments in mass transit.

Cash for clunkers was done because it was easy stimulus and some lobbyists got it into law, and as mentioned above had the benefit of increasing fleet fuel economy, something liberals are for and conservatives are against.

That sounds right. I'm not advocating silly spending, but I think we're illustrating that stimulus in deflation is good, right? WWII was stimulative despite its death toll. It would seem like in the big picture what was needed (or deemed needed) was to stimulate spending in the recession. If we helped air quality or gave another shot in the arm to the auto sector, so be it. But lord, please go buy some durable goods.

A trillion in stimulus was needed in 2009-2010 because we'd just lost the $100B/mo influx of bubble bucks:

http://research.stlouisfed.org/fred2/graph/?g=oTb

flowing from the hosing bubble.

The economy of 2012-2013 is a bit better than I was expecting, but I mark that down to the lower interest rate regime juicing home values, plus Bennie getting serious about flooding the world with capital, which while not quite as stimulative as the departed housing bubble, doesn't hurt (as long as price inflation doesn't roast everyone alive, which it hasn't -- yet).

"40% of this country barely has a pot to piss in". The modern version of "a chicken in every pot!" would be "free pots for your piss!"

Bellingham Bill says

Nobody gets the correlation between the 1970s inflation and the baby boom entering the workforce.

Well the correlation with the ladies hitting the workforce at taht time is occasionally mentioned.

Can you expound on the boomer/inflation bit? Is it that they increased demand and that increased the wages to create real inflation? A kind of virtuous cycle resulting in inflation?

CL says

"40% of this country barely has a pot to piss in". The modern version of "a chicken in every pot!" would be "free pots for your piss!"

Mmmmm chicken 'n piss

bgamall4 says

No Reality, you have it wrong. Bailing out the car companies bailed out the parts guys who would have buckled if the car companies went down. It was not about the car companies as much as it was about the suppliers. So, taking out a car company may not have ended there.

The parts guys should face the same culling if they can not make a living selling parts to consumers and carmakers left standing.

The real reason for the bailout however was due to the union jobs and their political campaign contribution.

Cash for clunkers was all about making the base price for any car start at $17K, $30K for a car that wont compact like a beer can stomped on by a 300lb drunk. Which then makes those fugly egg cars that nobody still wants in spite of all Obama's efforts, worth 60K or more.

They had to get rid of the $3K to $300 range car.
You get more for junking a car now than what your average used car over 10 years old went for before CFC.
I got $550 for MPV van that my daughters drove into the ground, blown motor, slipping transmission. I think it was 2004 I got less than $75 for an Acura Legend, when I junked it.

People can't afford gas, they can't afford Car insurance, and they'll never ever find a car for $1200. Cash for clunkers set the lower middle class and poor in this country back 60 years or more.

But We need those needy dependent bastards, or the Government just aint needed.

I heard that your average used car now is 6 to 8 years old and goes for 6 to 8K. Fuck before CFC, there weren't many two year old cars still worth more than 8K.

mell says

Wal-Mart claims that most of their jobs pay more than minimum wage, that doesn't
mean that they have a significant number of jobs at minimum wage.

From their most recent 10-k, Walmart employs 1.3 million people in the US, almost 1% of the total US workforce.

Total SG&A for US operations (including Sams Club) is about $61.3 Billion. If the only component of SG&A for Walmart were wages, that would average $47k per employee. Since I am pretty sure that each store needs electricity, water, maintenance, fuel for the trucks, benefits, and depreciation on capital purchases, not all SG&A is wages. EBITDA for 2012 was $36.4B vs. Net income of $17B, so total capitalization is $19.4B. Since the US is about 70% of total Walmart operations, lets apply 70% of capitalization to US operations. That is $13.6B in capitalization.

Subtract $13.6B in capitilization from the $61.3B, we $47.7B in SG&A excluding capitalization. I would guess that other costs excluding labor is at least 25% of the remainder. Lets go with that. $35.7B for wage expense. Divided by another at least 25% for payroll taxes, heathcare, and other employee costs - leaves $26.7B for salaries. Divided by 1.3 million employees is an average salary of about $20k.

Divided by 2000 hours per year, the average hourly rate is no higher than about $10 per hour.

That is including executives, ITers, truck drivers, cashiers, stockers, management, etc. Regardless of shift. Including overtime.

Bottom line - I would guess an extremely high percentage - well over 50% - of Walmart staff makes minimum wage. Compensation for C level excutives is over $100 million alone. The CEO makes about $25 million.

There you go - .5% of the total US workforce works for Walmart and is paid minimum wage.

control point says

Divided by another at least 25% for payroll taxes, heathcare, and other
employee costs - leaves $26.7B for salaries. Divided by 1.3 million employees is
an average salary of about $20k.

Divided by 2000 hours per year, the average hourly rate is no higher than
about $10 per hour.

That is including executives, ITers, truck drivers, cashiers, stockers,
management, etc. Regardless of shift. Including overtime.

Bottom line - I would guess an extremely high percentage - well over 50% - of
Walmart staff makes minimum wage. Compensation for C level excutives is over
$100 million alone. The CEO makes about $25 million.

You are way off on your analysis:

1. Walmart doesn't not pay 25% of total wage outlay as payroll tax and benefits. 25% of total outlay would mean 33% of wages! Payroll tax is 7.5% from employers, and Walmart doesn't provide benefits for most sales associate positions.

2. At million+ salary levels, payroll tax and benefits are near-zero. The stock vesting doesn't come out of the payroll expense number.

3. Most sales associate positions are not full time; most probably are not even 20hours a week. They are for students, house wifes, and retirees picking up some extra income on the side. Full time 2000hr a year positions at Walmart is much less than half of its payroll.

4. $10/hr is not minimum wage. It is nearly 40% above federal minimum wage! Granted, it may be too low to get you or me interested in a job, but a 37% pay increase is a huge pay increase for a part-time worker student/hous-wife/retiree leaving a minimum wage job behind to work for Walmart. Even $8 (a 10% increase over minimum wage) is enough for people to line up to apply whenever there is opening.

CL says

Can you expound on the boomer/inflation bit? Is it that they increased demand and that increased the wages to create real inflation? A kind of virtuous cycle resulting in inflation?

Yeah, that. This is just rough thinking about the credit cycle and supply and demand.

http://research.stlouisfed.org/fred2/graph/?g=oUF

shows the annual intake of new adults.

A new adult has demand -- needs a new car, new clothes, new place to live, etc.

A new adult also has an unburdened credit capacity, or did back then when we didn't load up $30,000+ of college debt on everyone.

The economy was HOT in the 60s and 1970s -- employment went up 30% in the 1960s and 28% in the 1970s (!) (vs. 20% each in the 1980s and 1990s and -1% in the GWB decade).

http://research.stlouisfed.org/fred2/series/PAYEMS/

Once an adult gets a job and credit, he can pull forward a lot of consumption with that credit, creating more jobs in a big feedback loop until everyone can't borrow no more.

The several recessions of the 1970s and early 80s were largely caused by the Fed slamming the brakes on this credit-inflation cycle.

Oil supply issues didn't help matters, but this was also partially an effect of the baby boomers adding to oil demand.

The last boomer didn't turn 16 until 1980! I actually went to high school with them, LOL.

Things are a bit different now, given how much we import instead of make here.

http://research.stlouisfed.org/fred2/series/MANEMP

shows how mfg jobs also spiked in the 1970s, rising about 2M from the early 1970s recession.

We've seen about 500,000 mfg jobs return since 2010.

Part of the story of the 1970s was how little everyone was in debt, relative to now. The gov't had been holding the line on borrowing, more or less:

http://research.stlouisfed.org/fred2/series/GFDEGDQ188S

Similar story for consumers:

http://research.stlouisfed.org/fred2/graph/?g=oUL

CaptainShuddup says

Cash for clunkers was all about making the base price for any car start at $17K, $30K for a car that wont compact like a beer can stomped on by a 300lb drunk.

This is right wing stupidity at it's finest.

Anyone with an IQ over 75 could chart the steady progression of car prices upward, as well as the increasing quality demanded by the marketplace. I paid a little over 16K for a honda Civic in 2003 (it was the EX ).

Today, a better Civic, 11 years later will go for about 19K. That's about a 1.5% increase per year for 11 years compounded. I believe it is higher quality for a number of reasons. It's a bit bigger and heavier, and they've had Hundai and Kia, not to mention other Japanese and also American Car makers to compete with.

I too am blown away by the fact that really nice cars now go for over 25K new. But it has been a very steady progression of prices that lead to this. If you graphed it, CFC would not represent the slightest blip.

The fact that you manage to connect current new car prices to cash for clunkers, is one of the more ridiculous things I've ever heard from you.

Actually it's kind of in line with the level of ridiculousness in most of what you say, but still I find this one surprising, because it took an extra push of creativity and outright dishonesty. Not to mention the denseness it takes to actually believe your own made up lies.(a soecial right wing trait).

You're turning in to a far right wing wacko version of that cranky old guy who says, "why I remeber when a candy bar cost just a nickel. OF course that was before they put Jimmy Carter in the Presidency and America went to Hell in a handbasket."

Bellingham Bill says

A new adult has demand -- needs a new car, new clothes, new place to live,
etc.

A new adult has wants. His/her wants translate into qualified demand when he/she earns enough to pay for those wants. When the government gives him/her money to translate those wants to demands, the taxation necessary turns someone else' qualified demand into unqualified wants. If interests have to be added, then more demand gets disqualified than wants get qualifed into demand due to the need to pay interest.

marcus says

The fact that you manage to connect current car prices to cash for clunkers,
is one of the more ridiculous things I've ever heard from you.

What's so hard to understand about:

1. removing supply of used cars jack up used car prices

2. higher used car prices drive buyers to new cars

3. the blanket $3k subsidy (guaranteed "trade in" for clunkers) drove up new car prices . . . just like the $8k incentive in 2010 drove up home sales.

In fact, there are idiots who advocate tearing down homes across the country in order to drive up home prices; i.e. forcing people to overpay for houses left standing after the massive tear-downs.