August 27, 2009
Host: Ted Simons
Cash for Clunkers
- Arizona State University economist Tim James will recap how the cash for clunkers program did and how it will impact the economy.
- Tim James - Economist, Arizona State University
| Keywords: cash for clunkers
Ted Simons: The numbers are in, and the U.S. department of transportation is reporting nearly 700,000 car sales in the Cash for Clunkers program. In a moment I'll talk with an ASU economist, but first, David Majure has more on the $3 billion program.
David Majure: The Cash for Clunkers program resulted in 690,114 rebate applications nationwide – worth nearly $2.9 billion. That's a little less than the $3 billion authorized by Congress to run the program. In Arizona, there were nearly forty $40 million worth of applications for rebates of $3500 or $4500 off the price of a new vehicle in exchange for an older vehicle that would be taken off the road and sent to the scrap heap. Of the top 10 new vehicles purchased, most were Japanese models. However, vehicles holding the top four spots are all built in the United States. The Cash for Clunkers transactions resulted in a 58% improvement in fuel efficiency. New cars averaged 24.9 miles per gallon, while the trade-ins averaged 15.8 miles per gallon. When it comes to an economic stimulus, the White House Council of Economic Advisors says the program will boost economic growth in the third quarter of 2009 by three or four 10ths of 1%, and create or save 42,000 jobs in the second half of 2009.
Ted Simons: Joining me now to talk about the economic impact of Cash for Clunkers is Dr. Tim James, a professor of economics at the WP Carey School of Business at A.S.U. Good to see you. Thanks for joining us.
Tim James: Nice to be here.
Ted Simons: How much of an impact -- let's start nationally, and then get to Arizona -- how much of an impact, Cash for Clunkers.
Tim James: I think they've done a -- it's had a fantastic impact. The piece of the stimulus package that's given us the most bang for our buck.
Ted Simons: How bad were car sales before the program, how much better off are they now?
Tim James: I looked at the figures, I think things got so bad that we're almost at the early 1990s levels. In Arizona in terms of dollar sales. It was -- we sort of regressed almost 15 or 16 years in terms of how much sales there were on a monthly basis.
Ted Simons: And that change is literally overnight.
Tim James: Oh, yeah. An amazing impact in terms of sales. Probably jumped 50% in terms of what would have been expected.
Ted Simons: And not only sales of cars that get the rebate, but just getting folks on the car lots.
Tim James: That's one of the added bonuses of the whole program. A lot of people got interested in maybe purchasing a new car, some people went in tried to qualify for the program, discovered their car wasn't within the amount, or they would just not qualified, so they went along anyway, and they looked around the lot and those people bought cars as well. So as far as an auto dealer goes in this state it has been the most significant part of the package so far.
Ted Simons: There has been criticism it's not sustainable. It's like a sugar high. Get a lot right now but later on it's going to fall off more than it ordinarily would have. Your thoughts on that?
Tim James: That might well be true. I mean the proof of that will come in time. I think it's inevitable that some people who would have exchanged their car some time in the next 6 months or a year came in now to find out the extra money was available, so there were some sales lost there. But we needed to do something for the auto industry, and the auto industry has been fantastic in many ways, because it's going to be something which helps out the state's budget in terms of sales taxes.
Ted Simons: As far as new car prices as well, there's the idea that because of an inventory shortage, this is going to cause an increase in new car prices. Are we seeing that?
Tim James: I think there probably is an effect like that whereby all inventory has been sold off and the 2009 inventory is running lower than probably would have been expected without the program. I still think auto dealers are in a difficult circumstance and it is going to be quite difficult for them. If you balance that out, it will increase prices because on the one hand maybe they got rid of some of the sales they made in the future, and on the other hand they've got slightly lower stocks. Hopefully those two things will balance out and people will still be able to get good deals.
Ted Simons: As far as the sales bubble being over, where do car makers, car dealers go from here?
Tim James: That's the $64 trillion question now – I think it is impossible to answer.
Ted Simons: Yeah, you just got to wait and see. Some car dealers are waiting and seeing if they're going to get their rebate money back. Is that working out ok? Are folks finally starting to see the money coming in?
Tim James: Obviously the success of the program has been one of its failings in a sense, because the number of people applying for the rebate has been huge, so the processing has been difficult thus the extensions. And hopefully the whole program will work out as expected.
Ted Simons: I know there was some concern as well that so many of the vehicles that were purchased were foreign made. At least run by foreign auto makers. Talk about that. The U.S. automakers really get helped as much as they could have been if the program had been tweaked?
Tim James: This is an easy question with a complex and difficult answer. So just let me try and talk you through the auto industry -- the auto industry is global in many ways. So when you buy a U.S. produced car, a Ford or G.M. car, often a lot of the are other parts that go into manufacturing the car, come from places you'd never imagined. And likewise when you buy a Toyota car, some of the parts come from U.S. destinations. So everybody in the auto industry has benefited from this. So we have to remember Germany and the U.K., European countries have done the same thing, and they've benefited U.S. automakers as well. I think the other thing to factor in, if you look at the statistics in terms of the percentage of the take, Toyota comes out on top, at approximately 19.5%, but G.M. is second. There's still a strong locally centered effect.
Ted Simons: There are those that also said this would have an environmental impact. Are you buying that?
Tim James: The environmental question I think is the real sort of red herring in this whole thing. Although we've taken a lot of gas guzzling cars, polluting cars off the road, and we've introduced more efficient cars, they're not as efficient as they really need to be in order to make a significant impact in terms of the effect on the environment. And also, you could question spending -- I think the real benefit is in terms of the economic stimulus. But I think you could question the benefit of spending billions of dollars on a car exchange program, rather than spending it on research, solar or weather proofing homes, getting more benefit in terms of the environmental benefits that way.
Ted Simons: So last question, back to the economic impact. Do stimulus programs like this work in stimulating the economy?
Tim James: Absolutely. This is at -- that this has had a fantastic leverage effect. We've spent $2 or $3 billion on the program, we’ve got $30 billion out of the sales, that’s a fantastic program as far as getting people who are sitting on their cash at the moment to get them to spend their money. Remember, you may be getting a 3½ or $4,000 rebate, but you've got to fund the rest of the purchase out of your own money. So it's got some of the people who weren't buying anything back out in the marketplace.
Ted Simons: Very good. Thanks so much for joining us we appreciate it.
Tim James: Thanks a lot.
- Will Humble, Director of the Arizona Department of Health Services, has the latest on the H1N1 virus and the State’s vaccination plans.
- Will Humble - Director, Arizona Department of Health Services
| Keywords: swine flu
Ted Simons: Good evening and welcome to "Horizon." I'm Ted Simons. A new development in the ongoing feud between Maricopa County attorney Andrew Thomas and the Board of Supervisors. In a ruling released this morning, the superior court judge says the board is justified in basically firing Thomas from handling its civil cases. The board created its own civil litigation unit citing a conflict of interest after Thomas began investigating a board member. The judge says Thomas did not follow rules of professional conduct in dealing with the board, but the judge says that when those rules of conduct are followed and no conflicts of interest exist, then Thomas's office should be the attorney of record for Maricopa County. As of Wednesday we've had over 1100 confirmed cases of the H1N1 swine flu virus in Arizona. That includes 116 new cases identified in the last seven days. Meanwhile the state working on a plan to distribute a vaccine. Here to talk about that is Will Humble, he Director of the Arizona Department of Health Services. Good to see you again, thanks for joining us.
Will Humble: Good afternoon, or good evening.
Ted Simons: Feds are saying half of the U.S. could get infected by this pandemic. Are you buying that?
Will Humble: Well they had a range of between 30-50%. So it could be as bad as 50%. A lot of that depends on how seriously people take this. And whether they change their behavior and do those simple things like washing their hands, staying away from work when they're sick, make sure they don't send their kids to school when they're sick. So folks do those things, we have a chance to have it closer to 30 than 50.
Ted Simons: Children and young adults could get hit the hardest. Why?
Will Humble: Well, it looks so far like it's kids, adolescents, and young adults that are hit the hardest by this virus. We don't exactly know why. We do know seniors are at a lower risk of complications from the virus. The theory behind that is that they were exposed to a similar virus in the '30s or '40s and therefore have some level of protection against this new virus. But you're right, it's kids, as adolescents, and young adults that are the most impacted.
Ted Simons: Is it the young adults, because they are parents of kids and many they're young folk? Why the young folk and not middle aged adults?
Will Humble: We're not sure. It could be they're getting exposed more frequently because they have kids and preschool age kids who bring home lots of different things. So that could be part of it. We're not really sure, but the trend is really consistent. We're seeing that constant trend of everything from toddlers to young adults being sort of a target group, which is why that's where we'll be focusing our vaccine when it comes in October.
Ted Simons: Let's talk about that vaccine. When is it going to get here? You say October. Is there going to be enough in October to vaccinate everyone who needs the vaccine?
Will Humble: Well, there's not going to be enough in October to cover everyone that needs it, but there will be enough to cover those high priority groups, which is going to be toddlers and preschoolers, kids of all ages with chronic medical conditions, pregnant women, caregivers of babies, newborns, moms, and so forth, and health care workers that have direct patient care. So we're expecting about 800,000 doses to possibly a million in October, and when you look at that broad spectrum of priority groups, that's about how many folks that we'll be targeting in October. So there's a decent match in that respect.
Ted Simons: Do we know as yet fits going to take one shot or two?
Will Humble: That's a huge question that we're all waiting to find out in the public health system. And in the health care community generally. It's a big -- the number one outlying question in terms of this response. Because if it takes an initial H1N1 shot and then a booster shot, it really complicates matters. That means you've got to find -- you've got to get the vaccine into somebody and track them down between six and eight weeks later and give them a boost. That sounds easy, but in public health practice and as pediatricians will tell you, it's not the easiest thing in the world to get people to come back. So we're crossing our fingers and hoping that the clinical trials that are out there right now will show you that one shot is good enough.
Ted Simons: Further complicating matters, you're still suggesting a regular flu shot be added as well.
Will Humble: The regular flu shot we hope just goes just like always. So what we want folks to do with regular seasonal flu is do what you normally would do. In fact, pediatricians already have the seasonal flu, many of them do, in their office right now. So pediatric providers have the regular flu sitting on hand and kids are getting those shots now, and it won't be long before you start to see those signs on the street that say flu shots today, and those will be regular seasonal flu shots, which are just as valuable as they have ever been.
Ted Simons: And for those who don't usually get a flu shot, they say I don't usually get the flu, these sorts of things, the reason this H1N1-- it's not so much that it's a severe form of flu, but it seems to spread so rapidly.
Will Humble: ou hit the nail right on the head. That is, this virus, this new H1N1 virus is justs about as severe as regular seasonal flu, but we have a lot more people that are susceptible because it's a brand-new virus, no one has been exposed to it before, so nobody has immunity, and it hasn't been in vaccines before, so no one has residual immunity from vaccines they've had in the past, so everyone is susceptible, which means that it's that much easier to transmit person-to-person.
Ted Simons: As far as the vaccines are concerned, do we know, first of all, how safe the H1N1 swine flu vaccine is, and do we know how safe it is to get that vaccine with the regular flu vaccine?
Will Humble: Those are two questions that will be answered in about two to three weeks. The C.D.C. is conducting clinical trials right now to determine those two questions. We talked earlier about, is it going to take one shot and a booster, or is one going to be enough? That's called efficacy. They're also looking at the complications. Is it safe. They're look at the question, is it -- is there any problem giving a regular seasonal flu along with H1N1, and then the H1N1 shot itself, is it safe, are there unknown consequences to getting the vaccine. Those clinical trials are well underway and we expect those results in early September.
Ted Simons: OK. You referred to this earlier, but let's wrap it up with the idea of prevention. Is it just as simple as washing your hands?
Will Humble: I know it sounds trivial. People say, come on, how can that make a difference? It does. Studies show it really works. That's -- the things your grandmother tried to drill in you is stuff that's real. Hand washing, keeping your hands away from your mouth and face, and those two things will do -- will go a long way towards protecting you. And then your responsibility to your community and your coworkers is to stay away from work when you're sick, and for crying out loud don't send your kid to school when they're sick, which is why it's important right now for families to have a contingency plan so that when their kids get sick throughout the school year, when we see a big bump in October, that they're not pressured into making a bad decision, and sending that kid to school. So it's about talking to aunts and uncles, and grandmas, and all that stuff to figuring out what are you going to do so you can still go to work and not be forced to send your kid to school sick.
Ted Simons:All right. Good information. Thanks for joining us. We appreciate it.
Will Humble: Take care.
Health Care Reform
- Suzanne Taylor, Senior Vice President of Public Policy for the Arizona Chamber of Commerce and Industry, shares her views on health care reform.
- Suzanne Taylor - Senior Vice President of Public Policy, Arizona Chamber of Commerce and Industry
| Keywords: health care
Ted Simons: Tonight on "Horizon" we conclude our week-long series of interviews on health care reform. Joining us is Suzanne Taylor, senior vice-president of Public Policy for the Arizona Chamber of Commerce and Industry. Good to see you. Thanks for joining us.
Suzanne Taylor: Thank you Ted, pleasure to be here.
Ted Simons: Let's start again as we do -- as we've done all week, with the basics. Is health care reform necessary?
Suzanne Taylor: It is necessary. The Arizona chamber represents employers of all sizes and all industries. We represent the providers as well as the insurers and one thing they all agree on is that we do need to reform the current system.
Ted Simons: How urgent is the problem?
Suzanne Taylor: What we believe is that the problem could be best addressed in an incremental fashion. There are urgencies to it, but we're dealing with something that affects a sixth of the United States economy. So we'd like to see focus on those areas where we can see the greatest gains.
Ted Simons: I would guess that the chamber would like the idea of free market ideas being used as far as reform is concerned. The concept of free market delivery, free market payment, these sorts of things, is that how the chamber sees the reforms should move?
Suzanne Taylor: Well, that's correct. We would really like to see the focus of reform on how we bring down cost first of all. That's a huge issue for large employers, from a global competitiveness standpoint, smaller ones. We'd also like to see the issue of the uninsured as well as access to care addressed.
Ted Simons: So how would you like to see the free market more involved in that?
Suzanne Taylor: We do believe it's important to bring everyone into the system. Everyone should have insurance. And we think that can be accomplished through the free market. It may in fact be necessary to provide some sort of a sliding scale of subsidies to low-income people, or those that work for small employers, but rather than creating a new government plan, we think that could be accomplished through the free market.
Ted Simons: Critics will say the free market and private insurance is there now, but preexisting conditions and other things are keeping people -- whatever the numbers, 30, 40, 50 million whatever they are, folks from having insurance. How do you address that?
Suzanne Taylor: Well, we do not have a truly free market system right now. The industry is heavily regulated and we have a lot of people that are not in the system. We have a lot of healthy people that don't have insurance right now because they think they don't need it, and we do have a serious issue with preexisting conditions. It's interesting to note insurance industry has said they're willing to do away with that and provide coverage to anyone regardless of their conditions as long as everyone is in the system.
Ted Simons: I was going to say, way back at the beginning of the debate the idea of everyone has to have health insurance was floated out there. And the shots started being taken. What does the chamber think about that idea?
Suzanne Taylor: We believe everyone should have health insurance. It's tough -- it's a tough issue to deal with. Because you are saying -- you are putting a mandate on people, but we think there's a way to accomplish that with a variety of incentives, and a variety of ways to reduce the cost so it is more affordable.
Ted Simons: Back when the -- they first started, the idea was that if it's not mandated, it's never going to work. The dam will never hold if there are a few holes here and there.
Suzanne Taylor: Well, I think that's exactly right. Because if we do move down the path of what's called guaranteed issue, that means insurance company would have to provide coverage regardless of preexisting condition, and could not charge more for that, then we do need something that's going to bring those healthy people into the system, so they're not just purchasing it after they get sick.
Ted Simons: The public option plan. Against it?
Suzanne Taylor: We are. That is the area where we have the greatest concern. We do not believe that a government-run health plan is going to actually do anything to improve costs or access to care.
Ted Simons: Explain, please.
Suzanne Taylor: Well, there's a number of reasons for that. One is that the government plans that we have right now, meaning Medicare and Medicaid, which provide insurance to a large number of Americans, are actually underpaying providers significantly for the care that is rendered. And Arizona Medicare pays about 89% of costs, and Medicaid about 79. What happens is that incremental difference between what they pay and what actually costs has shifted to the private sector by way of increased premiums. It's over $1,000 a year for a family policy that we pay for that. If we move to a full government plan, we're going to see that really skyrocket, and at the end of the day that's going to mean a couple of things. Increased taxes, we'll have to pay for somehow, and probably some rationing of care. Neither of those are attractive solutions.
Ted Simons: Administration I believe says that the cost will wind up coming down for health care if the public option were included. You disagree?
Suzanne Taylor: I disagree with that. It doesn't actually address the issue of cost. It's an attempt to bring more people in. We think there are better ways to do that that would be more effective in lowering the costs.
Ted Simons: Vouchers, tax credits, these sorts of things. Can there be enough to get those tens of millions who don't have insurance right now and will never be in a position to get employer-based insurance, is there enough vouchers and tax credits to take care of those folks?
Suzanne Taylor: Possibly. It depends on how it's structured. We don't have a great model right now. That's why we're a little concerned about this complete overhaul all at once. There's some pilot projects in different states we'd like to give a little more time to take a look at, see how those work, but I do believe that there are ways to bring everyone into this system.
Ted Simons: What about the co-op idea?
Suzanne Taylor: The co-op is an intriguing idea as well. The jury is still out on how that would function. One of the concerns we have is that if a certain minimum set of benefits is required, we want to know how that's defined, because if that is a much richer set of benefits than what a lot of companies are offering now or individuals are choosing, than that would also increase the costs.
Ted Simons: The concept of employer-based insurance. Health insurance. How does the chamber look on not only where it is now, but the future?
Suzanne Taylor: The majority of large employers, about 97%, do offer health insurance to their employees as a benefit. It makes sense for them to do that. Healthy workers are productive workers. Smaller businesses generally are struggling to do that. So what's working well, we want to see capped and tacked and not dismantled, but we definitely need other options to make it more affordable for those small businesses to offer.
Ted Simons: What would an option be?
Suzanne Taylor: Again, in some cases it will have to be somewhat subsidized. There are simply folks that have serious preexisting conditions that aren't going to be able to opt in. That's one thing. But also, making more choice available so that the smaller companies can buy a policy that makes sense for them, rather than being told exactly what they have to buy, which may not be affordable.
Ted Simons: About 30 seconds left. Some critics say the profit motive needs to be erased from health care. Your thoughts?
Suzanne Taylor: Health care is an industry. We have for-profits and not-for-profits. So it's part of the system. I don't think it's the focus of the problem right now.
Ted Simons: All right. Very good to have you on. Thanks for joining us.
Suzanne Taylor: Thank you, Ted.