Cash for Clunkers and Retail Sales

The administration has just announced that the Cash for Clunkers program will end on Monday at 8:00 PM, rather than in November as previously announced. Apparently the program is about to run out of money (again).

The program received huge praise from politicans and the media for stimulating car sales in late July. Yet retail sales for July were down slightly, and below expectations. Perhaps the two events are related. That is, people with clunkers took advantage of the temporarily low prices on new cars to buy in late July, but they offset these expenditures with reduced purchases of other durables like washing machines or computers.

For more on the silliness of the Cash for Clunkers program, see my earlier op-ed at cnn.com.