They say hindsight is 20/20, so lets try it out and see what we can learn from the Car Allowance Rebate System, better known as Cash for Clunkers. This program was implemented by the federal government in 2009, intending to increase employment, give a boost to the economy and positively impact emissions by taking older cars off the road.
Lesson #1 – Government Buy-Back Programs Spend a LOT of Money
This incredibly popular program blew through its first $1 billion in its first five days. People flocked (22,400 requests per day) to trade in their older cars for a higher trade-in value than they might have otherwise gotten. Between July 1 and August 24, 2009, Americans traded in 700,000 “clunkers” and ended up costing taxpayers $2.85 billion.
Lesson #2 – Production, GDP and Job Creation was small and short-lived
Production increased by approximately 380,000 vehicles. The Brookings report found that 45% of this spending went to “consumers who would have purchased a new vehicle anyway.” The net result is that GDP received a negligible increase and each job created cost the taxpayers $1.4 million.
Lesson #3 – Shredding Cars is Stupid
When the government designed this program, it didn’t take into account the total life cycle of the scrapped vehicles, or the environmental cost of manufacturing new vehicles that were sold.
The Automotive Recyclers Association (ARA) states that almost every part of a vehicle can be recycled. Instead of sending traded-in vehicles to recyclers or used auto parts stores, like Big T’s (www.usedautopartsindianapolis.net/services), most were destroyed by federal mandate. Once the engine was destroyed, the vehicle had to be shredded after 180 days to prevent re-selling. For each ton of shredded metal, almost 500 pounds of “shredding residue” is produced, which is subsequently placed in landfills. Argonne National Laboratory estimated that just recycling the plastic and metal would represent 24 million barrels of oil saved.
Lesson #4 – The Negligible Emissions gain came at great cost
The Resources for the Future study found that the program did increase the average MPG of new vehicles purchased–by 0.65 MPG. The cost to the taxpayers for this increase was higher than what could have been achieved with a more cost-effective policy.
The well-intentioned Cash for Clunkers program did not achieve its stated goals and cost the taxpayers an extraordinary amount.