Be Wary of Cash-for-Clunkers-o-Nomics

Demand for new equipment will spike, then collapse
By John Johnson,  Newser Staff
Posted Sep 7, 2010 12:49 PM CDT
President Obama speaks on the economy at the Milwaukee Laborfest in Milwaukee, Monday, Sept. 6, 2010.   (AP Photo/Pablo Martinez Monsivais)

(Newser) – So President Obama is going to give businesses a break by letting them write off 100% of the cost of new equipment and plants. Welcome to "cash-for-clunkers-o-nomics," writes Joe Weisenthal at Business Insider. In a tepid economy, probably the only companies that take advantage will be those that have older equipment due to be replaced in a few years anyway.

"Cash-for-clunkers simply pulled demand forward, by getting people who had aging cars, who were about to buy a new one, to speed up their purchases," writes Weisenthal. "Predictably, sales tanked once the program was over." That's what will happen here, too. Oh, but there's one difference, he writes: "While clunkers was just a $3 billion program, this is a $200 billion program, more than 66x bigger." For more on Obama's plan, click here.

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