Barron’s / Homebuyers’ Handout — Worse Than Cash for Clunkers

COMMENT: The article states that it is estimated that 85% of homebuyers that will get the $8,000 tax credit would have purchased a home even if the credit had not been available. The real danger in any federal stimulus is that a program is too wide spread and as a result is not as stimulative as Congress would hope it to be. Another unknown at the time of passing a stimulus bill is the reaction of the public to the measure. If the price tag is estimated at $15 billion then Congress was off by a factor of 2 as to the popularity of the program. Ultimately the price tag could reach $30 billion. This summer the auto cash for clunkers bill was passed by Congress and included up to $1 billion for the program, only to extended it to $3 billion a month later. According to the LA times new car sales were 23% less this September, after the program ended, then they were for the previous September. The real question becomes, are we bringing future consumption forward?                                                                                                       FURTHER READING: Boston Globe/ Cash for Clunkers for Appliances