Last week, as part of a post on the larger subject of the continuing economic slowdown, I made the statement,

“But consider this question – now that the government has front-loaded several months’ worth of demand into a single month, what do you think is going to happen in the months to come?  The answer – no demand for automobiles, dealers going out of business, and more layoffs of workers from idle factories.”

Hate to say it, but it looks like I was right,

It has been nearly a month since the car-buying frenzy of the Cash for Clunkers program ended, and many area auto dealers are longing for the good old days of July and August.

Like consumers nationwide, Massachusetts residents rushed to take advantage of the federal voucher program, which offered them up to $4,500 on old gas-guzzlers to be put toward the purchase of new, more fuel-efficient vehicles. About $65 million worth of vouchers were handed out statewide during the monthlong program that ended Aug. 24.

But once the federal money dried up, so did the sales rally. Now, customers at dealerships like Silko Honda in Raynham are few and far between, and inventory is once again accumulating.

Manager Adam Silverleib said business was “pretty intense’’ as a result of the federal stimulus program, with the dealership hustling to accommodate customers and handle the piles of paperwork required for them to receive reimbursement on vouchers. “Now we’re kind of back to where we were in the spring,’’ he said.

I never fail to be amazed at how other people are amazed that economic principles actually work like they’re supposed to. 

Face it, folks, the present Administration is perhaps the most immature one we have ever had.  One thing that children and other immature people are most noted for is their inability to foresee the results of their own actions.  Anyone with sense could have seen that piling several months of demand for new cars would result in a big rush while the money was flowing….followed by a massive slump once it wasn’t.  The problem is, instead of just having a low but sustained demand over the intervening months, now there’s going to be almost NO demand.  Which means everything I predicted – closed dealerships, closed factories, and people losing their jobs. 

Further, the Obama administration’s Cash for Clunkers program now makes the used car market for the lower end of America’s socio-economic ladder less friendly.  A lot of cars that otherwise would have been sold to the poor are now in some government scrap heap somewhere, and the remaining used cars will cost more because supply is lower, while demand remains the same.  The poor are not going to turn in a car, so they can buy a new one and stick themselves with a $400/month payment on it.  But they are going to have to pay more to buy a used car now, thanks to the geniuses who make up the Obama economic brain trust.

Further, as an email I received recently notes,

A vehicle at 15 mpg and 12,000 miles per year uses 800 gallons a year of gasoline.

A vehicle at 25 mpg and 12,000 miles per year uses 480 gallons a year. 

So, the average “Cash for Clunkers” transaction will reduce US gasoline consumption by 320 gallons/car per year. 

They claim 700,000 vehicles – so that’s 224 million gallons / year.

That equates to a bit over 5 million barrels of oil.

5 million barrels of oil is about ¼ of one day’s US consumption.

And, 5 million barrels of oil costs about $350 million dollars at $70/bbl.

So, we all contributed to spending $3 billion to save $350 million.

How good a deal was that???

Indeed.