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« Misunderstanding the Fed Balance Sheet -- A Costly Mistake | Main | Employment Report Preview »

August 04, 2009

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VennData

Let's not forget the taxes paid by the re-hired autoworkers, the places they shop, etc... and even eating into whatever "loss carrys" the automakers themselves have.

If economics is about psychology as posited by Shiller, then there's an entire affect that's not measurable with current tools as well. All we know is gov'ts everywhere "do things" to "get the economy moving." And we've always come out of these things before - except when the Hooverites were in charge. But even then, "we did something," (aka Roosevelt was elected) and the gov't "did things" (many, many other things besides the Agricultural Adjustment Act.)

oldprof

Patrick -- As usual, you have made a good observation.

A problem in an article like mine is where to draw the line. I am trying to hit a theme of obvious impacts versus more comprehensive analysis, using economic approaches.

One is much more complex, and more accurate, than the other. Yet the complexity does not drive the debate. I have to decide how deeply to delve in order to show this.

There are many other similar issues, including almost everything related to the stimulus package.

As you and other readers no doubt can tell, I agree with the spirit of this comment and also your prior observations on many subjects.

Thanks,

Jeff

oldprof

RB -- Good point. I did not really "miss it" since I read carefully everything from Hamilton. I just needed to decide how deeply to delve. Perhaps I should have included this and thanks for pointing it out.

Jeff

Patrick

The Edmunds data uses sales figures from a year ago when auto sales were at all time highs (15-16 million per year). Since auto sales have been 60% of those figures since last Fall, the whole Edmunds analysis seems faulty or biased to produce a desired result.

The Gov't owns large stakes in C and GM. Any cost would have to figure in the appreciation in worth of these stakes. Could be that $1 billion produces $2 billion increased value in the auto makers.

While auto demand is maybe only temporarily depressed, and would have to come back 2-3 years from now, dealerships were full of unsold 2009 cars. This program, is clearing out the old inventory and makes room for 2010 models.

This is obviously a subsidy, and a big one. But I wouldn't compare the impact against carbon prices in Europe or other normal metrics. It is a stimulus program, maybe only a step above Keynes' famous hole digging, but it should be valued as a stimulus program.

RB

You missed probably the most important post of all -- that the replacement rate was already unsustainably low . Perfect example for policy makers jumping in to claim undue credit or perhaps, they get credit only for bringing in the correction by a few months. This, further explained by Jim Hamilton , was pointed out well in advance of current events.

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