Valid questions

My unpleasant and unfortunate experience with customer service this past weekend did get me thinking about 'Cash For Clunkers' since, well, that started the devolution of that particular conversation.

My friend's observations revolved around his personal ideological predisposition to the program itself - which is something I wholly respect, but don't think is a valid enough reason to either praise or denounce the program - and the more concrete discussion of whether or not the program worked to help the economy.

My answer to him, and the one I restate here, is 'well, yes ... and kind of.'

On the whole, I think it's difficult to argue that 'Cash For Clunkers' has not been a success given the three primary reasons it was introduced in the first place - spurring sales, removing non-fuel efficient vehicles from the road and replacing them with more fuel efficient ones, and cleaning out a backlog of inventory from dealers nationwide. On all three fronts, the program has done just that.

It hasn't been without some quirks, however, and they range from the government woefully underestimating the popularity of the program, thus dramatically understaffing its needs, to dealers struggling to handle the sheer volume of sales and, in turn, passing on incomplete or inaccurate reimbursement requests to program administrators. These quirks, which necessitated many of the dealers having to front money and wait for the reimbursement, have proven to be problematic.

And, judging by most accounts, they've either been dealt with or are currently being dealt with. That's not to minimize the legitimate concerns these quirks have raised, but it's also important to remember that folks are working hard to fix an unprecedented program that is only a few months old.

One of the things I'm curious to see is an excellent observation raised by The Atlantic's Derek Thompson, which is whether or not the program merely moved what would be the expected sales from the third and fourth quarter of this year into a rapid, one-month time-span. It's a more than valid point, though I'm somewhat skeptical it was truly the case given the still shaky consumer confidence ratings, the threat of a jobless recovery and backlog of inventory.

Even if it does prove to be true, however, I suppose it could be argued the program spurred folks to purchase more fuel-efficient vehicles, which would be a net-plus in the grand scheme of things (though, to be fair, isn't necessarily a valid economic argument for the program).

Truth be told, I think it will be more clear later in the year. Despite the massive spurring of sales, much of the reimbursement money has not been allocated yet, thus making it difficult to see the total economic benefit given the impact of the subsidy. Likewise, despite this being a case of immediate fiscal stimulus, seeing its impact on the overall economy won't be truly felt for another month or so (since economies, you know, are big things).