Posted by Sir Four at 10:54am Aug 5 '09The cash for clunkers program offers up to $4,500 toward the purchase of a new car for anyone who brings in an old gas guzzler. The old vehicle will be crushed and sold for scrap. As much as $3 billion will go toward funding this program.
There are a few upsides. It's helping dealerships and auto manufacturers move vehicles. It's helping states get some much-cherished sales tax on the new car purchases. It's taking off inefficient vehicles and replacing them with more efficient models. This results in less pollution and less gasoline usage. It's obviously making some people happy, as they ditch their old car for a new one.
The downsides are too obvious to ignore, though. Scrapping the old "clunkers" and replacing them with new vehicles is more energy-wasteful than allowing them to continue to drive on the road. Also, the people taking advantage of the program may fall into these two troublesome categories: those who would end up buying a new car soon anyway, but have been simply delaying their purchase; and those who aren't in the best financial shape, drive an old clunker, but can't exactly afford to take on a new auto loan (but do it anyway because free money is too good to pass up). The program is also unfair in that you can only qualify for free money if you were one of those jerks (*ahem*) who bought and drove around in some gas guzzling SUV back in the day.
On balance, I don't think this was the brightest idea. The bit on energy savings is false. Stimulating auto sales might be good, but I'd prefer if it were more fairly distributed, and I hesitate to say we needed it at all given sales were bound to pick up again regardless. Maybe gas will be some fraction of a dollar cheaper in the years ahead due to hundreds of thousands of more efficient vehicles on the road. That in itself has broader stimulus effect. But then again, cheaper gas is what inspired the purchases of all those clunkers to begin with.
There are a few upsides. It's helping dealerships and auto manufacturers move vehicles. It's helping states get some much-cherished sales tax on the new car purchases. It's taking off inefficient vehicles and replacing them with more efficient models. This results in less pollution and less gasoline usage. It's obviously making some people happy, as they ditch their old car for a new one.
The downsides are too obvious to ignore, though. Scrapping the old "clunkers" and replacing them with new vehicles is more energy-wasteful than allowing them to continue to drive on the road. Also, the people taking advantage of the program may fall into these two troublesome categories: those who would end up buying a new car soon anyway, but have been simply delaying their purchase; and those who aren't in the best financial shape, drive an old clunker, but can't exactly afford to take on a new auto loan (but do it anyway because free money is too good to pass up). The program is also unfair in that you can only qualify for free money if you were one of those jerks (*ahem*) who bought and drove around in some gas guzzling SUV back in the day.
On balance, I don't think this was the brightest idea. The bit on energy savings is false. Stimulating auto sales might be good, but I'd prefer if it were more fairly distributed, and I hesitate to say we needed it at all given sales were bound to pick up again regardless. Maybe gas will be some fraction of a dollar cheaper in the years ahead due to hundreds of thousands of more efficient vehicles on the road. That in itself has broader stimulus effect. But then again, cheaper gas is what inspired the purchases of all those clunkers to begin with.
What are the Thoughts on Cash for Clunkers? - Sir Four