A new report from the Brooking’s Institution shed’s new light upon the Obama Administration’s Cash-for-Clunkers program: it was an economic lemon.
According to the report, the $2.85 billion Car Allowance Rebate System (CARS) created jobs at the price of $1.4 million each and had almost no effect on reducing emissions or gasoline consumption.
Under the 2009 program, people could trade in older, less fuel-efficient vehicles in return for a voucher that could be used to buy a new, more fuel-efficient vehicle. Car owners traded in 678,000 vehicles with an average voucher reward of $4,200, and vehicle sales rose by 14 percent in July and 28 percent in August (the two months the program ran before funds ran out), boosting new vehicle sales by 380,000. This was only half the overall 700,000 vehicles sold during those two months and according to the report additional purchases would have occurred during subsequent months anyway.
The Brooking’s report largely confirms what both earlier reports show. For instance, a 2009 report from vehicle research firm Edmunds.com found that of a total of 690,000 new vehicles sold under the Cash for Clunkers program, only 125,000 were vehicles that would not have been sold anyway, and each of those cost the government $24,000 per vehicle. In addition, the NCPA provided an analysis of the cash for clunkers program which was largely critical of the administration’s plan.
Brookings found that not only did cash for clunkers not push tons of new cars out the door, in addition, it was among the poorest programs for creating jobs and didn’t do so well in reducing greenhouse gasses:
- · The $1.4 million price per job created was six times higher than the next most expensive job creation stimulus policy and was 10 times more expensive per job created than the reducing the employer payroll tax.
- · The price per ton of emissions was far higher than the social cost per carbon or even what carbon emissions would have cost under the 2009 House cap-and-trade climate bill but the price was equivalent to the cost per ton of carbon dioxide under the $3,400 hybrid vehicle tax credit, and more cost-effective than the tax subsidies for electric vehicle, ethanol and renewable fuel standards.
Overall, it says, the program only saved about eight days’ worth of current gasoline consumption.
Another negative effect of Obama’s cash-for-clunkers plan as it was carried out is that because it destroyed the cars traded in, the used car market suffered shortages and used car prices went up considerably. This means that people unable to take advantage of cash-for-clunkers but also unable to afford new or now higher priced used cars keep their aging vehicles on the road, even as they pollute more and more.
The NCPA actually developed a cash-for-clunkers program that would have avoided many of these problems, and would have had the added benefit of removing more older cars and thus improving air pollution.
What next, another failed green energy grant recipient? Oh, wait, that happened too this week.