The 'Cash for Clunkers' program (a.k.a. the wittily named Car Allowance Rebate System) has been declared a resounding success, with buyers and dealers loudly requesting more. Congress has satiated them for the time being with an additional $2B allocation on top of the original $1B. Even the net gas mileage improvement has been higher than expected.
But is the program really a success, meaning has it increased the common good? Or are the politicians just bribing voters with other people's money? Consider:
- Has new demand been created or have sales been pulled forward? Pulling sales forward with ridiculous financing is part of the reason vehicle demand slumped so much in the first place. We won't know for 3-6 months whether the demand is lasting.
- Was it wise to target only fuel economy or should have non-CO2 emissions been considered as well? New cars emit substantially lower amounts of toxic emissions (SOx, NOx, particulates, hydrocarbons) than before 1994-7, when the Tier 1 emissions standards were phased in. And there were other emissions milestones before that. Perhaps a different calculation could have been used for older cars.
- Should every trade-in be destroyed, or should they each be analyzed and then sold or donated. Obviously, the latter. There's not much point in crushing a car that is in decent shape. If the vehicle has a fuel economy rating close to or above the median, it should be re-used. (Remember the 3 Rs - reduce, reuse, recycle.)
- What will be the effects on the auto repair industry? The repair and aftermarket parts industry had been doing relatively okay because people were fixing old cars instead of buying new. Has demand just been shifted around?
- What about the used vehicle market? The program might not be taking the very worst vehicles off the streets. Instead, it might be catching vehicles one step up from true beaters. These are cars that people who can afford a new car have been willing to drive until they were offered free money. Poorer people with worse cars are being bypassed.
- Would spending $1B or $3B in a different way have a better effect? Could more oil be saved by building more roundabouts? Could more oil be saved by weatherizing homes heated with oil, or converting them to natural gas? Could the money be given to federal and state governments to upgrade their fleets? Or to transit agencies to buy more and more efficient buses? How much of the money will "leak" over the borders?
As I opined elsewhere on the tubes, I didn't really mind the program as long as it was temporary. To me, the main goal appeared to be to help dealers and, by extension, manufacturers, by clearing inventory. Adding another $2B to the program will make it hang around much longer, and the unintended consequences will increase to a point where they really should be taken into consideration.
But they won't be. Who can argue with success, or the illusion thereof?
Update 2009-08-11: Some non-mendacious funkiness with the reported numbers has given a slightly distorted view of what vehicles are selling. Explanation here.