Obama Mulls A "cash For Clunkers" Program

by The New Republic | March 30, 2009

As always, Jon Cohn is your go-to source for auto-industry news. I'll just point out that, in his remarks today, Obama made the intriguing suggestion that he'd push for a federal "cash-for-clunkers" program, whereby people could turn in their old inefficient cars and get a tax credit to buy a newer, cleaner car. Here's Obama:

Finally, several members of Congress have proposed an even more ambitious incentive program to increase car sales while modernizing our auto fleet. Such fleet modernization programs, which provide a generous credit to consumers who turn in old, less fuel efficient cars and purchase cleaner cars have been successful in boosting auto sales in a number of European countries. I want to work with Congress to identify parts of the Recovery Act that could be trimmed to fund such a program, and make it retroactive starting today.

The tip is from Russ Walker. Here's Jason Bordoff of Brookings making the case for this program, which could theoretically clean up the air, reduce carbon emissions, and stimulate the economy by boosting new auto sales all in one blow. On the other hand, here's an old post by Rob Inglis wondering if the plan might have unexpected consequences—among other things, the reduction in tailpipe emissions might get partly offset by an increase in car-manufacturing emissions.

Still, it's not a bad gesture. Right now a big dilemma for the auto industry is that they're struggling to meet stricter fuel-economy standards and are supposed to be greening their fleets in exchange for congressional bailout money, but Americans aren't showing much zest for smaller, efficient cars, let alone hybrids, with gas prices back down. A gas tax would nudge consumers in a greener direction, but that's not going anywhere in Congress. (And, just to correct Jon a bit, Obama's proposed cap-and-trade regime for carbon emissions likely wouldn't raise the price of gasoline by very much at all—maybe ten cents a gallon in the short term.) A cash-for-clunkers program might be the easiest way to thread this needle, or square this circle, or whatever the clich

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