Obama Favors Clunkers for Cash


Photo via Mopar Muscle Magazine

Yesterday President Obama told Chrysler and GM that it is time to shape up or ship out. He also said he supports a program that would pay people to trade in older cars for newer, more fuel efficient vehicles. Europe has successfully tried this, but could it work here and would it be good for the planet?Speaking about a so called "cash for clunkers" program, Obama said:

"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."

This is especially true in Germany, where new auto sales are said to have risen 20 percent last month. Of course, Europe has much higher gas prices than we do, increasing the desire to go with a greener car. They are also taxing people for their carbon output, again incentivizing people to get rid of heavier, more inefficient cars and trucks., A gas tax and other complimentary taxes that would bring our prices in line with Europe's is politically unlikely, so a trade-in program may have some political legs given Congress's new found attention on the climate.

The idea has supporters in high places other than the president. Princeton economist Alan Binder has long championed the idea as both a great green idea and as an economic stimulus.

In his plan:

The government would post buying prices, perhaps set at a 20 percent premium over something like Kelley Blue Book prices, for cars and trucks above a certain age (say, 15 years) and below a certain maximum value (perhaps $5,000). A special premium might even be offered for the worst gas guzzlers and the worst polluters. An income ceiling for sellers might also be imposed — say, family income below $60,000 a year — to make sure the money goes to lower-income households.

The numbers in this example are purely illustrative. By raising the 20 percent premium, lowering the 15-year minimum age, or raising the $5,000 maximum price or the $60,000 income ceiling, you make the program broader and costlier — and create a bigger stimulus. By moving any of these in the opposite direction, you make the program narrower, cheaper and smaller.

Another supporter is Ohio Rep. Betty Sutton, who sponsors the CARS Act, which creates vouchers of between $3,000 and $5,000 for people to trade-up. Given the president's announcement yesterday, it's suddenly a viable question to ask if there will be any American cars to buy if a cash for clunkers plan was enacted.

More on Cash for Clunkers Programs:
Obama to Automakers: Make Greener American Cars or Go Under
Beijing to Drivers: Give Up Your Car, We'll Pay You $3,600
Is Buying Up the Country's Clunkers Smart, Eco-Friendly Policy?

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