Is Cash for Clunkers a "Clunker?"

BlogHer Original Post

It seemed like a good idea: the Cash Allowance Rebate System (CARS, a.k.a. "Cash for Clunkers") a program aimed at saving the environment by creating a taxpayer-funded program in which people traded in their "clunkers," or perfectly drivable cars with 18 mpg or less into dealerships in exchange for rebates up to $4,500 towards a new, more fuel efficient vehicle. The program was so successful, it blew through its $1 billion dollar funding in a mere seven days, mostly because people like the appearance of free money. Congress hurriedly voted to inject an additional $2 billion into the program on Friday.

A couple of things have surprised me about this program; this morning while on air speaking to Skip Weber of George Weber Chevrolet (a local dealership owner here in St. Louis) Weber explained how the program has provided a short, artificial boost in business. They're actually trying to bypass using the program dollars by accepting trade-ins on their own rather than take the taxpayer dollars for it. Interesting. 

There are several things that I don't like about the Cash for Clunkers program:

1) It is another example of the government overstepping its authority and manipulating the private sector by artificially depressing prices.

2) It's a false inflation of business as the surge will likely dry up once the taxpayer dollars run out.

3) The government failed to keep its promise that the "Program runs through Nov 1, 2009 or when the funds are exhausted, whichever comes first" which begs the question as to whether or not Cash for Clunkers will receive a third infusion of taxpayer dollars to stay alive.

4) There isn't anything "green" about destroying cars which can get people from their homes to their jobs. The Cash for Clunkers program mandates that the engines - the most expensive part of an automobile - must be destroyed to be compliant with the program. The NHTSA says that this is done to prevent fraud, to stop trade-ins from finding their way back to the highways. The consequence of this mandate is that fewer vehicles will be donated to charity and there will be fewer vehicles available for lower-income families to buy. My mother was a poor single mom - the only car she could afford when I was a kid would have been a clunker by today's definition, a car simply to get her to and from work.

Prices for those engine parts will increase, thus making it harder for lower-income earners to even fix the older cars they have. When their car finally dies, sure, one less gas-guzzler on the road, but one more family possibly facing unemployment because the adult can't get to work.

5. Maura Judkis writes:

The environmental idea behind the bill is that it takes old, inefficient vehicles off of the road. But some environmentalists are actually opposed to the bill because it takes functioning cars off of the road before their time is up, and does not permit the vouchers to go towards used vehicles, even if they are more fuel-efficient.

Precisely. I also don't see how adding "clunkers" to landfills is green. 

6. It's too easy to spend the rebate on a muscle car.

7. Instead of getting full value out of the "clunker's" engine, the program requires the destruction of it, basically frittering money away.

8. The effect on the used-car industry. I've never purchased a brand new vehicle in my life because a) I can't justify the depreciation just from driving it off the lot and b) I'm middle class, I clip coupons, and we're on a budget. This program strangles the very industry my family (and millions of others) relies on when looking to get a new-to-us car.

9. The maximum $4,500 rebate is equal or near-equal the vehicle's depreciation once driven off the lot.

10. This is a penance to the auto industry, and a late one at that. If the idea was to jump-start sales, why not do it, say, before the big bailouts?

11. The government, via the taxpayer, is covering the warranties for all new GM and Chrysler vehicles at the moment. So if you purchase a GM or Chrysler via Cash for Clunkers, the taxpayer is not only giving you dolla bills to buy your car; the taxpayer is also paying for your warranty, too.

12. This plays into the hands, too conveniently, I feel, of the whole hybrid/electric car industry. Honestly? I think electric cars and hybrids suck. When I'm rolling down the highway and my kids are sippin on juice in the backseat, I want them in a safe car made out of heavy metal - not some Flintstone-powered clown car that I feel I could physically lift up over my head.

(I've been in wrecks - bad ones, one time as a kid my family and I spun across a major interstate during rush hour after being battered by a semi and were splayed out in the median. I was so thankful for that giant, solid, car.)

Sister Toldjah attests to my car concerns and notes the mixed reviews ultra-fuel efficient vehicles such as hybrids have received:

Exactly, but the purpose of CforC is to get those cars off the road – period – in the name of helping to “save the environment”, but there are a lot of people out there, especially right now, who could better afford a “previously owned automobile” like the ones that are being “given back” under the CforC program than the more allegedly “environmentally sound” hybrid vehicles. Heck, even if I wanted to buy one – and I don’t, because I don’t think most of them are especially safe for both passengers, pedestrians, and first responders at the scene of an accident – I couldn’t afford to. The Ford Fusion Hybrid is close to $30K, and the more “economical” hybrids like the Honda Insight have gotten decidedly mixed to bad reviews in terms of comfort, handling, speed, safety, and the upkeep expense.

13. This doesn't bode well for the other "clunkers" this administration wants to fix.

Althouse asks:

Is this just some oddball quirk of a program, or should we see it as a sign that all those other programs loaded with money and big ideas are fatally ill-designed?

While I like consumer habits to change on their own and not because lo, the government commandeth it; it seems to me that the best recourse would be to let those automobiles phase themselves out naturally while providing some sort of incentive - tax credits, perhaps - to dealers, auto owners, to put towards the purchase of more fuel efficient, American-made vehicles. We don't have to always be penalized with a tax if we don't do this, a fee if we don't do that; some positive motivation would go a long way.

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