How Cash for Clunkers will screw up the CPI

Posted Sep 11th 2009 12:00PM by Zac Bissonnette
Filed under: Economic Data

John Crudele over at The New York Post writes about yet another hidden consequence of the Cash For Clunkers program: "... the folks at the US Bureau of Labor Statistics confirmed to me that the subsidy received by those 800,000 car buyers will be handled in the CPI next week as if the price of a car fell by $4,500."

Let's be very clear: This is one of the dumbest things in the history of the United States.

How the hell can you possibly count a taxpayer-funded subsidy as free money and use it to show that the cost of cars fell?

Can you imagine if the U.S. government took the increase in the number of people on the welfare rolls and then used that to show the the price of milk was on the decline because milk paid for with government money is free? This is exactly what they're doing by counting the 800,000 cars sold under the Cash for Clunkers as having cost $4,500 less than they actually cost. Using taxpayer money to buy people cars does not fight inflation.

There are two possible explanations for this gross error. One is the conspiracy theory: The Obama administration is trying to masque the effects of inflation and so it's acting as though that $4,500 rebate was actually a bolt of lightning that magically made cars cheaper without reducing the amount of money that car dealers made.

But honestly, I don't think that's likely. It's just too transparent of a ploy and it will be easy enough to adjust for the cost of Cash For Clunkers once the results are out.

That leaves us with explanation number two: The people at the United States Bureau of Labor Statistics are really, really, really stupid.

Now that sounds about right.

Tags: Bureau of Labor Statistics, Cash For Clunkers, Consumer Price Index, cpi, featured, inthenews

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Reader Comments (Page 1 of 1)

9-11-2009 @ 12:37PM

markabracy said...

Do not under estimate your conspiracy thoughts, as lowering the CPI screws both Social Security and the Military Disabled for all of next year. That amounts to enough money to make anything plausable. Please also note that our Military Disabled are compensated for lost wages only (at near poverty) and not for the quality of life that they lost protecting our freedoms. Please support the findings that our Veterans should be compensated for the effects of their injuries on their daily life. All gave some, some gave all.

9-11-2009 @ 1:36PM

thedude said...

Actually it is a combination of the two - The Obama administration does want to mask inflation BECAUSE they are really really really stupid

The Obama administrations estimates on the cost of health care for 40 million uninsured over 10 years is $1 Trillion - this number is dependant on none of those 40 million actually requiring any serious medical attention

First the $1 trillion number is about 30% too low, second if even just 3% of those 40 million do require an operation or have a hospital stay of one week that $1 trillion number jumps to over $2.5 trillion

But Obama isn't worried because he and Hillary Clinton will simply borrow the money from China