Is “Cash for Clunkers” a Good Idea, Ever?

The New York Times today endorsed a bill from Senator Chuck Schumer, and its companion in the House, co-sponsored by Long Island Democrat Steve Israel, which would offer up to $4,000 in vouchers to drivers who give up their gas guzzlers (averaging 18 miles-per-gallon or worse) in exchange for "a new or used car that exceeds the corporate average fuel economy for vehicles in its class by 25 percent."

According to the Times, the Schumer-Israel bill — the Accelerated Retirement of Inefficient Vehicles Act (ARIVA) — is superior to an alternative proposal from Rep. Betty Sutton of Ohio, whose Consumer Assistance to Recycle and Save Act (CARS) would authorize up to $5,000 in vouchers to drivers who swap their old cars for "new ones that are assembled in the United States and carry a minimum fuel-efficiency rating of 27 m.p.g." Beginning in 2010, Sutton’s bill would offer $7,500 toward domestic hybrid models averaging 100 mpg or more.

The Obama administration likes the "cash for clunkers" concept. CARS has the backing of the UAW and, not surprisingly, is favored by Detroit. "But because more than half the cars in showrooms today already meet the
27 m.p.g. standard set by the bill," write the editors of the Times, "the measure would provide fewer
environmental benefits than the more ambitious Schumer-Israel proposal." ARIVA, on the other hand, would "guarantee considerable oil savings and significant reductions in carbon dioxide."

Or not. In a recent New Yorker article, David Owen sums up the argument against a CAFE-based cure-all.

If doubling the cost of gas gives drivers an environmentally valuable
incentive to drive less — the recent oil-price spike pushed down
consumption and vehicle miles travelled, stimulated investment in
renewable energy, increased public transit ridership, and killed the
Hummer — then doubling the efficiency of cars makes that incentive
disappear. Getting more miles to the gallon is of no benefit to the
environment if it leads to an increase in driving — and the response of
drivers to decreases in the cost of driving is to drive more. Increases
in fuel efficiency could be bad for the environment unless they’re
accompanied by powerful disincentives that force drivers to find
alternatives to hundred-mile commutes.

It isn’t mentioned in the Times editorial, but each "cash for clunkers" bill does in fact offer incentives for drivers to leave their cars behind — sort of. Both CARS and ARIVA would give drivers the option of trading their personal wheels for transit vouchers, but the payout is limited to $3,000.

While such measures could conceivably entice urbanites in transit-rich environments, despite being shortchanged, to give up their cars altogether, what impact might a popular federal "cash for clunkers" program have on the rest of the country? And if the goal is to reduce fossil fuel consumption, why on earth would the transit benefit be $2,000 less than that granted to the new car buyer?

  • anonymous

    What could be done with this money if it went to expanding and improving public transit rather than helping people buy new cars?

  • Stupid to tinker around the edges when all interests are best served by a $1/gal gas tax.

  • Larry Littlefield

    Fine, as long as the bill also requires that everyone with an older car that gets more than 18 mpg and everyone who doesn’t have a car get a postcard saying “screw you loser” signed by their congress person.

  • oscarfrye

    a nice thank you gift for driving around a beast for the past five years, while us responsible people who didn’t choose such cars foot the bill.

  • Adam

    Shame on me for doing the right thing and only ever buying fuel-efficient cars and then driving them until they’re just about worthless. Hey, what’s to stop me from buying an old, barely-working beater for $500 now on spec and then trading it for the $4,000 voucher after the law passes?

  • rlb

    I am not an economist, but I have heard of the Jevons effect. It follows from the fact that an increase in energy efficiency decreases the cost of that energy, thereby increasing the demand. If the demand increase more than makes up for the savings from increased efficiency, you’re are back to or even beyond where you started.
    We are at risk of this happening with cars and hybrids and electric cars without the government giving away money. Forced demand will only make it more likely that emissions will actually grow with an increase in automobile efficiency.

  • Terrible idea. Those clunkers will eventually run themselves down and people will then be able to make their own decision about buying a car or not without the government making that decision for them (i.e. encouraging them to buy another car). This is really just another part of the Detroit bailout that Obama’s pushing for.

  • Ashcan Sam

    Maybe this will encourage me, a non-car owner, to buy a $500 clunker just so I can turn it in and get $5000.

  • Yeah with headlines like these “German car sales soar 40 percent in March” I can’t blame them for wanting to copy German policy (again). The German government is helping to stimulate its auto manufacturing base buy giving people 2,500 Euros to replace their older, more polluting and less efficient cars for new ones.

    The problem with trying to replicate such a policy here in the US is that American car manufacturers don’t currently produce too many clean and efficient cars.

    I’d say I’m for it if it applies only to SUVs and Light Truck owners and then they must buy small, efficient cars.

    Get those pedestrian killing behemoths off the road!

  • I believe there is a stipulation that requires you own the old vehicle for some period of time, like 2 years, before you can qualify for the tax credit on trade-in. That is to prevent what you are talking about – buying a clunker just to get access to the credit.

  • I can’t blame them for wanting to copy German policy (again).

    Germany has abundant public transit. Are we going to copy that policy too?

  • I said wanting. I didn’t say doing.

    I wish to hell someone around here would copy Germany’s bicycle transportation policies! Massive improvements every time I get to go back.

    Copying their High-Speed rail wouldn’t be bad either. Or their, renewable energy policy, health care, etc, etc, ….

  • Miguel Marcos

    For the ‘rest of the country’ would it make sense to keep the clunkers around? Given the facts of suburban life that won’t change radically in a short period, I am in favor of having people drive more fuel efficient vehicles. Getting mass transit accessible in suburbia, much less changing people’s habits and the structrue of suburbia, is not a short term project. It’s a legitimate and necessary objective but it won’t take place overnight.

    Will a driver with a car that is more fuel efficient drive many more miles because the expense is lower? I’m not sure. I don’t think the drivers will radically change their habits (drive to work, supermarket, kid’s soccer game). If drivers do not consume more miles with these more efficient cars, then you’re reducing overall consumption. It’s not going to translate into a massive reduction in fuel consumption but I’ll take what I can get. A little less for the oil companies, perhaps a little less oil imported.

    This legislation does perpetuate the car society but it raises the efficiency of the same which, small as it is, is a step forward. Of course, it should not be used as a smokescreen for the better and longer term solution which is to build communities that are more sustainable, better equipped with public transportation, facilitating the use of feet and bikes as an option, and locating things in such a way where a private car is not the best option.

  • Miguel Marcos

    Here’s a different nightmare: Replace the pool of carbon-based cars with electricty-based cars. I think this is worse than the above replacement of clunkers. In this case, a whole beastial infrastructure will have to be built anew to support huge numbers of private electric vehicles. Sheesh.

    Same traffic jams, high speeds, same suburbia.

    When will they learn…

  • Given the facts of suburban life that won’t change radically in a short period,

    Depends what you mean by “a short period.” If that short period is long enough, by the time it’s over we’ll be underwater.

  • Miguel Marcos

    What I mean by short period is the next few years, the timeframe for this legislation. During such a short period it would be useless to expect deep change in the whole concept of suburbia.

  • bb

    I have no problems with taking the 4,000. They can have my old run down bicycle it is so a gas hog.

  • This is a terrible idea. They are completely forgetting about the pollutants released during the manufacturing of cars, which is not negligible. In some cases it could be more environmentally friendly to keep driving that old clunker with the bad gas mileage than to buy a brand new hybrid due to the high carbon cost of the manufacturing process. Sorry, but your Prius is not going to save the world.

    It’s much better to just tax greenhouse gases and let those prices guide people’s choices (including choosing to live without a car, something this would discourage).

    …but of course the policy isn’t really meant to help the environment, it’s to help General Motors pretend that the demand for cars is going to stay anywhere near where it was during the late 90’s through mid-00’s.

  • John

    Raise gas taxes, implement electronic tolls, increase real estate taxes on parking lots, raise yearly property tax fees on inefficient vehicles, etc. but the last people who “Deserve-A-Bailout” are those who helped put us in these dire conditions. In addition require Complete Streets at the federal level and use the money the new revenues to achieve those goals.

  • Here is a consumer FAQ page on the bill:

  • Jaxon

    I don’t qualify because my car already gets good gas mileage. But my dad swears by the car buying process here:

    I have a feeling dealers are going to automatically increase prices because of the increased demand (artificial) for great MPG cars. So the thousands of savings from this bill for consumers is not entirely accurate.

    With the price increase, I’m certain some markets you’ll come out even as if they never offered this voucher. It is poorly written legislation.

  • The Cars For Clunkers legislation is actually very focused and is only available for a limited four month time frame. It offers participants the opportunity to trade in certain older cars for certain other new ones. Unfortunately, many cars do not qualify for the program and therefore are still ideal for the ‘traditional’ car donor option. Such non-qualifying cars let people give their cars to non-profit organizations who help people with many different kinds of needs, like supporting youth organizations or our older folks or to help promote the arts and health research.

    Help yourself with the Cash for Clunkers program if you qualify or if you don’t qualify or would like to help others, give your “clunker” to charity and take a tax write-off!

    Here are 400 not-for-profit organizations that can always benefit from your ‘clunker’ or unneeded vehicle. To donate your car, just click on the link to the charity on the web pages below.


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