Diary

Cash for clunkers can't help retail numbers

Bloomberg reports today that U.S. retail sales dropped in July amidst a boost in the cash-for-clunkers incentive program put forth by the federal government. Read here:

Today’s report underscores the threat to spending from the continued deterioration in the job market; a separate government report today showed more Americans than forecast filed claims for unemployment insurance last week. Retailers such as Wal-Mart Stores Inc. and Macy’s Inc. are cutting costs and inventories to bolster profits as households cut back on non-essential items.

Plain and simple, significant job losses are still out there in the marketplace.  Everyone is feeling the pinch and with that, who wants to take on the additional burden of a new car?  Granted, there are some clunkers being traded in, however, if you have a working vehicle what are you really saving by purchasing a new one?  Does the incentive help pay for your new taxes on the vehicle?  Does it help with added insurance you now will have to pay if you were only needing deductible coverage before?  Are you really saving that much in gas money with the new car?  Plain and simple, if you have a working vehicle, people are not incentivized to purchase a new vehicle with all these other additional costs as most people would deem them non-essential.

Therefore, the government just invested $1B of our tax-payers money (or was it money borrowed from the Chinese government and then we the tax payers will have to pay it back with interest which will amount to more than the original $1B) into a short-term incentive plan which did not help with the retail industry.  So what is their solution to this?  Just add another $2B to the program!  And what will happen when that money runs out and also does not help meet the retail numbers for August?  Well, let’s just see how the spin doctors will work their magic on this.  The most important thing is that once the money runs out on this program, it is gone.

For Universal Healthcare, I am afraid that there would be a big push to have so many people forced into a system that would not be able to sustain it.  One of the big questions on this HealthCare plan is not a matter of if they run out of money but when.