Was Cash for Clunkers Good for Anything?


Photo via CBS

The dust stirred up by Cash for Clunkers has finally settled: the $3 billion government program closed up shop weeks, if not months, ahead of schedule due to its extraordinary popularity. In its wake, it spawned another rebate program, Obama called it a "success beyond anyone's imagination" and it gave the auto companies their best sales months in recent memory. But there are still serious doubts about its merits. There's still a big mess of auto parts to clean up, emissions have not been significantly lowered, and the economy may not have benefited much at all. 'Clunkers' was touted as being good for the economy, and good for the environment. But was it actually good for anything?Other than middle class consumers, of course--that's the one group the program seemed to undoubtedly benefit. People who already owned cars, and were likely in the market for another certainly enjoyed the $3,500-4,500 rebate, and the incentive surely got people to buy cars sooner rather than later.

But the success of just about every other aspect of the program remains up for debate.

On the surface, it looks good: Some 500,000 new cars were sold, and 500,000 polluting 'clunkers' were taken off the streets. The big auto companies saw their best sales in recent memory. Everyone wins, right? Not so fast.

Cash for Clunkers and the Environment
The environmental benefits, as has been noted before, are dubious at best. First, it's an extremely expensive, and relatively ineffective method of cutting carbon--conservative estimates place it as costing $150 taxpayer dollars per ton of CO2. A permit for polluting a ton of CO2 in Europe costs $20. And it makes a relatively tiny dent in total emissions: as noted by CBS study predicts it will decrease US gas consumption by 160 million gallons a year, when US motorists consume 378 million gallons of gas every day.

Second, there are rising concerns with the discarded materials--each of those 500,000 clunkers had to be scrapped, remember. The Institute of Scrap Recycling Industries has noted that there's over 1,000 pounds of mercury in the clunkers collected so far--and the automakers have claimed it's not their responsibility to properly dispose of it.

Cash for Clunkers and the Economy
But defenders of the program say that its primary purpose was to help the economy. And it did that beyond anyone's wildest expectations, right? Well.

The auto industry is concerned that it's going to enter a worse slump than before now--after all, the people who put the program to use were those that were already at least contemplating buying a new car. Automakers and dealerships worry that most consumers, who would have trickled in over coming months at a steady pace, were instead simply packed into these last couple weeks. So it might appear to be a successful stimulus now, but in reality, it could've just condensed stronger sales into a shorter period of time, and we'll subsequently see weaker sales over the next months.

And then there's the fact that while the auto industry benefited (at least in the short term), it was at other industries' expense. CBS News reports:

"We did not magically create more demand for these cars," says Jeffery Miron, a Harvard economics professor ... "We are taking it from other consumers and reducing demand for all the other goods in the economy and transferring it to those who take advantage of the program."
Spending was lower than normal in other industries, as families saved to buy cars instead of shopping for other goods.

The Green Lining of Cash for Clunkers
So, while there's plenty of room for debate here, and coming months will give us a clearer picture of whether the program truly succeeded economically and environmentally, there is one distinct benefit I can see emerging from the event. That's the fact that it offers evidence that legislation aimed at simultaneously helping consumers and motivating greener behavior can be effective and popular.

While its own environmental credentials were far from ideal, it could be used as a model for better programs that incentivize buying green products in the future, like the so-called Cash for Refrigerators program coming this fall. And it could give some congressmen a new angle to start approaching environmental legislation from, and could have a positive net impact in that regard.

More on Cash for Clunkers
Is Cash for Clunkers Government Greenwashing?
Thieves Cashing in on Stolen Clunkers in Germany
Bill Clinton Suggests "EVs for Clunkers " at National Clean Energy ...

Tags: Carbon Dioxide | Carbon Emissions | Economics | Fuel Efficiency

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