LTT Opinion: 411 on “cash for clunkers”

Way back in February, we looked at the “cash for clunkers” programs already enjoying success across Europe- Germany, France, Spain, Britain…, where it goes by the slightly less stupid name of ‘scrappage incentives’- and wondered if something similar could ever work over here. Well, after the initial $1 billion allocated to the subsidy here in the U.S.- which was expected to last until November- evaporated in under a week, that question was put to rest. The House was forced to quickly vote on another $2 billion in clunker coupons, with the Senate expected to vote to extend the program soon. But other questions remain- is it a good idea? is it good for the environment? is Glenn Beck the craziest man on television?

The 411

The “cash for clunkers” program was designed to achieve three main goals- 1) stimulate the economy by luring the middle class back into showrooms, 2) provide the ailing car industry a much-needed shot in the arm and, if possible, 3) begin the transformation of the American fleet of cars towards more fuel efficient vehicles. The idea is pretty simple. The government will give consumers up to $4,500 to trade in older vehicles (less than 25 years old) that get 18 mpg or less (combined EPA ratings), in exchange for a vehicle that does 22 mpg or better.

Effect On The Economy & Industry?

Transportation Secretary Ray LaHood calls it a roaring success, saying, “the government has proved we can get money out the door and sell almost 160,000 cars.” LaHood and others estimate these transactions to be worth $664 million, suggesting the trade-in program has made an immediate and indisputable impact on the struggling U.S. auto industry. Ford announced on Monday that their July U.S. auto sales were up a strong 2.3% over results from one year ago, a result that company executives linked to “cash-for-clunkers.”

But critics suggest the impact on the economy is negligible. The Wall Street Journal calls it “crackpot economics. The subsidy won’t add to net national wealth, since it merely transfers money to one taxpayer’s pocket from someone else’s, and merely pays that taxpayer to destroy a perfectly serviceable asset in return for something he might have bought anyway.” Former Fed Chairman Alan Greenspan believes the program is an effect of a rebounding economy, not a cause. “It’s an interesting issue,” Greenspan says, “I mean, I have qualms about the concept, but there is no doubt that that very extraordinary response is a very important indicator that the state of confidence in the economy is beginning to pick up.”

Effect on Environment?

Larry Summers, National Economic Council President, said on NBC’s Meet The Press that “the so-called cash for clunkers program has actually been far more successful than people expected, both in terms of the number of car sales it’s generated, and, I should say, in terms of the environmental benefit.” But what exactly is the environmental benefit? The Guardian’s Ryan Avent says the eco-thinking behind the program is based on sound logic: “Cars 13 years old and older generate 75% of all automobile pollution while travelling only 25% of the miles driven…Over the course of 10,000 miles, for instance, an improvement from 18 to 28 miles per gallon (mpg) will save nearly twice as much gasoline as a move from 34 to 50 mpg.”

Still, folks like Cameron Scott (SF Chronicle’s Thin Green Line) are skeptical. Scott argues the current program is a typical Washington half-measure, the effect of which is diluted by the already low emissions standards in this country. “The government requires fleetwide average fuel efficiency of 2009 American vehicles to be just 23 mpg…In Europe the number is 45, and it’s even higher in Japan, leading Japanese cars to trounce their American counterparts class by class in fuel efficiency.” He concludes, “it seems to be working fairly well as an economic stimulus program without actively screwing the environmental pooch.” Faint praise, indeed.

We’ll continue to track this story, but Scott is right to say that until the U.S. can match the fuel efficiency of Europe and Japan, we’ll continue to get trounced. Proof is in the pudding- 4 of the 5 top cars being bought through the “cash for clunkers” program are foreign. After the Ford Focus, which is surprisingly the top-selling new car,  Japanese automakers are dominating: the Toyota Corolla, Honda Civic, Toyota Prius and Toyota Camry. But, on the bright side, of 157,000 trades that had occurred as of Tuesday morning, 80% of the “clunkers” were SUVs and trucks. That’s gotta be a good thing!

(AP Photo/Rick Bowmer)

  • Tags: Carbon Footprint, Facts & Figures, Green Initiatives, LTT Opinion, Waste
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