Industrywide U.S. sales rose 12.7%, according to sales tracker Autodata, capping the best quarter for auto sales in the United States since the first quarter of 2008, before the combination of a gas price spike and the meltdown in financial markets later that year devastated sales and nearly led to the end of the U.S. auto industry.But, but, gas prices! Regular followers of TPV know that I have discussed how the President has beaten the beltway wisdom on the politics and economics of high gas prices by diversifying sources and increasing efficiency (in both homes and cars), but here is more concrete evidence.
U.S. sales hit a seasonally-adjusted annual rate of 14.4 million vehicles for the month, the third straight month the pace of sales has topped 14 million. The only month to reach that mark from mid-2008 through the end of last year was in August 2009, when sales spiked due to the "Cash for Clunkers" program.
Typically overall auto sales are hurt by gas price spikes, as the drop in demand for less fuel-efficient models outweighs any gains in high-mileage vehicles. But that has not been the case with the current run-up at the pump. While industrywide car sales rose 16%, truck sales also climbed 9%, according to Autodata.Wait, what? High gas prices don't seem to be having an effect on the auto boom? Actually, high gas prices, it seems are having an effect. It's just not the effect conventional wisdom would dictate and the Republicans are praying for.
"The combination of credit availability, an improving economy, pent-up demand and even high fuel prices encouraging people to acquire newer, more fuel-efficient vehicles are all helping to drive industry sales," said Reid Bigland, head of U.S. sales for Chrysler Group, which includes the Chrysler, Dodge, Jeep, Ram and Fiat brands.Yes, who would have thought that if you make a wide array of fuel efficient vehicles available, including a ton of American made ones, that Americans would suddenly confront high gas prices by deciding to dump their gas guzzlers and buy fuel efficient cars, especially with the easier availability of credit? The president and his economic team thought of it. When President Obama and his economic team deliberately set out to rebuild the economy as right wing policies sent it into a tailspin, they realized that it was more important to strengthen the core of the economy than to implement a quick fix.
First thing, stop the bleeding. It was going to take some unpopular but necessary steps. The financial rescue, the auto rescue and the Recovery Act. Second, stimulate or spur consumer spending. They did this through Cash for Clunkers, home weatherization, and extension of aid to states and unemployment benefits - all steps that looked to political observers at the time as "not working" to "fix" the economy. Third, invest in critical areas: infrastructure, student assistance, research.
Also, as the crisis hit and people started hoarding their cash, although in the immediate scene it was a negative for the economy, the president's team, I suspect, saw that as a harbinger of things to come. If people are hoarding cash (those who had any), what you need to give them is enough confidence in their own future to spend it. That's what the team focused on like a laser. Now that the economy is on the upswing, the hoarders have found out their best investment in a volatile energy market: a fuel efficient vehicle, in many cases an American one!
And ta-da! Suddenly the high gas prices, which the Republicans and pundits counted on to take the economy down are having the opposite effect and stimulating new car purchases.
By the way, this flow of credit? Also available thanks to President Obama's management of the financial rescue of the banks that managed to tick off the Right because the Obama administration held banks accountable while they still owed money to taxpayers, sent the Professional Left in a whining frenzy because he didn't nationalize the banks, but ended up making money for taxpayers in the end anyway.
This is the free market at work. All Barack Obama and his economic team did was to make what consumers would demand in a high gas price environment - fuel efficient vehicles - a reality from American automakers and gave consumers plenty of choices. They retooled the American auto industry so that they can meet the demands of the future. This is the future.