Was Cash for Clunkers a Waste of Energy?

“Cash for Clunkers” was a signature achievement for the fledgling Obama administration in 2009. Blowing through all predictions of modest public demand, it consumed the $1 billion allocated to it in just five days — Congress had to hastily approve another $2 billion for the program. It was certainly seen as a big success at the time.

Cash for Clunkers got 700,000 polluters off the road, added $2 billion to the GDP, and created more than 2,000 jobs as it involved nearly every auto dealer in America. The average car clunked had 15.8 mpg combined; the average one bought to replace it had 25.4. This was, and is, exactly the kind of program of government stimulus program that economists like the New York Times’ Paul Krugman said we needed at the time — a persistent recession, which among other things drove car sales down from 11 million annually to 9 million.

Jesse Toprak, vice president at Truecar.com, says that the program “accomplished what it set out to do, which was to get consumers back into the showrooms and to jump-start new-vehicle sales.”

Could it have been handled better? You bet, and that’s the conclusion of a new Brookings Institution analysis by Ted Gayer and Emily Parker. They say that Cash for Clunkers:

• Cost as much as $1.4 million per every job created, and was much less effective than other stimulus programs such as increasing unemployment aid or reducing employees’ payroll taxes;
• Didn’t do much for the environment because only about half a percent of new cars on the road at the time were energy efficient;
• Saved only about two to eight days of gasoline supply for the U.S.

The Brookings study (including the infographic below), predictably, got some attention from Tea Party bloggers, who derided the program as an "environmental nightmare." It was far from that, though something was lost in translation. To get through Congress, government programs get so mangled with amendments and compromises you wonder why they bothered. (Central exhibit: Obamacare.) That was part of the problem with Cash for Clunkers, because, as E/The Environmental Magazine reported, it would have had far more environmental benefit if the cars taken in had been recycled (their parts resold) rather than shredded.
Not all the cars taken into the program were old wrecks; many would have made excellent parts donors. But the program mandated that the engines be destroyed (to prevent a black market in resales) and their bodies rapidly shredded. This created all sorts of problems, including the fact that some parts of the car — plastic trim, seats — aren’t currently recyclable. Every year, about 4 million tons of shredder residue ends up in landfills for that reason, and Cash for Clunkers contributed to that total.

Despite all this, Cash for Clunkers was and is a viable concept. And it would work better today than it did in 2009. The fuel economy of new cars and trucks is at an all-time high in 2013, and we would (hopefully) avoid some of the big mistakes of four years ago.