Remember "Cash for Clunkers"? An environmentalist's dream come true!
The idea was that the Car Allowance Rebate System (CARS), known popularly as "Cash for Clunkers," allowed consumers to trade in older, less fuel-efficient vehicles for voucher they could apply toward the purchase of newer, more fuel-efficient vehicles. Administered by the National Highway Transportation Safety Administration (NHTSA), here's how CARS worked:
- Participants would trade in the "clunker" at a dealership. The vehicle's engine was destroyed to ensure its permanent removal from the U.S. vehicle fleet.
- Vouchers for either $3.5k or $4.5k were provided, depending on the difference in fuel economy between the trade-in vehicle and the new vehicle.
- Nearly 700k clunkers were traded in between July 1, 2009, and August 24, 2009. The eight-week NHTSA spending spree cost taxpayers anywhere from $2.45B to $3.15B.
Announcing CARS, President Obama promised taxpayers that the price tag would be a wise "investment." It would would provide a temporary stimulus to counter the economic contraction. CARS would also reduce fuel consumption and emissions.
Part of the President's promises were fulfilled:
- CARS did incentivize the sale of more fuel efficient vehicles. How? By motivating people to buy now rather than down the road (pardon the pun).
- CARS also caused a slight improvement in fuel economy and some reduction in carbon emissions.
According to a Brookings Institution report, although CARS did result in a small and short-lived increase in production, gross domestic product, and job creation, the implied cost/job created was much higher than alternative fiscal stimulus policies would have been. In addition, the stimulus effects did not account for the depletion of the capital stock that resulted from the destruction of used vehicles.
But, economic facts don't matter in the Land of Oz!
Most importantly, the cost/ton of carbon dioxide that CARS reduced suggests that it was an inefficient (meaning "not cost-effective") way to reduce emissions. Yes, CARS was more cost effective than some other environmental policies, such as the tax subsidy for electric vehicles or the tax credit for ethanol. But, as with most environmentalists' ideas that get enacted as public policy, they waste taxpayers' hard-earned money when they don't have to.
Who should give a hoot? After all, it's all a grand experiment along the "Yellow Brick Road."
We're all off to see the Wizard!
Let the discussion begin...
To read the Brookings Institution report, click on the following link:
"Cash for Clunkers: An Evaluation of the Car Allowance Rebate System."