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The airways Friday morning were full of talk of the success of the "Cash for Clunkers" program. It has been so successful that Congress is racing to add more money. [As of Friday at 2 pm eastern the House had passed a bill to increase funding by $2 billion.]
What was the evidence of success? What lesson was learned?
Well, apparently, if the government offers to give people money, quite a few of them will take it.
6 Responses to “Cash for Clunkers: A Big Success”
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August 3rd, 2009 at 5:07 am
Sure, everyone is poking fun at the government about “giving away money.” What, would you rather bail out another bank?
I, for one, and encouraged that the program has been extended; it’s helped the auto recycling business too.
August 3rd, 2009 at 1:20 pm
The question one should ask is if this is one of the better potential uses of several billion dollars. It makes me a little sick to see a functional automobile killed and scrapped. Of course, I don’t buy into the threat of CO2 emissions. I don’t see that it’s going to help in that regard anyway, or that it will significantly increase overall fuel efficiency for that matter.
This is gimmickry at it best (maybe worst). There are a lot of people who would be thrilled to have one of the destroyed “cash for clunker” victims. There are so many things wrong with this program that I don’t know where to stop, so I’ll just call it quits.
August 4th, 2009 at 10:49 am
If “success” means the program costs several times as much as expected, many more programs are successful than I would have thought.
If we’re paying $4000 on average for people to trade in a car that requires .05 gallons per mile for one that requires .04 gallons per mile — which I think are roughly what the program requires — and we suppose that the cars are driven 8000 miles per year (I figure 10k is about average, but someone with an old, low-milage car is probably driving less than average; 5000 might be fair, but I’ll use 8000), that’s 80 gallons of gas saved per year. For every gallon of gas saved per year, we’re paying $50 up front. I’m not sure how many years that should be spread over, but I would think it’s not nearly enough.
If the purpose of the program is stimulus, there are much better ways of doing that to the economy at large rather than prop up a sector that still has too much invested in it rather than too little. A cut in the payroll tax comes to mind.
August 4th, 2009 at 5:51 pm
It looks like the difference between the cars being purchased and those being turned in is two or three times as big as I guessed.
August 5th, 2009 at 6:53 am
This is a program tat has only one purpose: to keep carmakers in the US busy. There are similar programs elsewhere (Germany for instance). I would have no problem if the shareholders of uncompetitive car makers had been wiped out, and if legal avenues for making imports more expensive were exhausted. But, in the final analysis, it is protectionism and hence, by definition, welfare reducing.
August 5th, 2009 at 12:15 pm
Every dollar that the government gives to people in this program has to be obtained from somewhere else. Thus, money that is currently being spent on automobiles will not be spent on other things. There is no net gain from this program.