Cash-for-clunkers Goes Haywire

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THE VINE JULY 31, 2009

Cash-for-clunkers Goes Haywire

Politico is reporting that the government's "cash-for-clunkers" program has already run out of the $1 billion it was given after only a week in operation. It's a bit crazy: All told, in just five days, some 300,000 people traded in their older, inefficient cars in exchange for a $3,500-$4,000 voucher to buy newer, more efficient cars. (Part of the crush this week was due to a backlog—dealers were reportedly offering the rebates long before the rules officially went into effect.)

Now, as we've noted before, the actual environmental benefits of this program may well prove modest. The fuel-economy requirements for the new car were, after all, fairly lax: You could in theory trade in a Hummer that got 14 mpg and get $3,500 toward a brand new 18 mpg SUV. That's still an upgrade (and, in fact, that trade would actually save more gas than upgrading a 30 mpg sedan to a 35 mpg vehicle), but it's a meager one. And if the upgrades are, in fact, all meager, they could end up being dwarfed by the energy required to manufacture new vehicles (particularly since dealers have to scrap the "clunkers" that get traded in—many of which are perfectly good, albeit inefficient, cars). It'd be interesting to see data on what people actually purchased.

On the other hand, the program certainly offers a jolt to the economy, and can provide a huge boon to the ailing auto industry—$1 billion to spur the purchase of 300,000 new vehicles in five days has to rank as one of the more fast-acting stimulus programs to date. (I imagine the program is mostly just moving up purchases that would've happened anyway, but in a recession, that's not a bad thing.) Still, if the program's so popular, and if everyone's lining up to trade in their old clunkers, then if Congress does decide to re-up, it ought to ratchet up the fuel-economy requirements for new cars, so that we can at least get some energy benefits out of this thing.

--Bradford Plumer

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