Cash for Clunkers Program

Several years removed, critics of the government’s “cash for clunkers program” are citing this failed administration’s program designed to stimulate the economy. What was the “cash for clunkers” program? According to mmn.com “Was a signature achievement for the Obama administration in 2009. Blowing through predictions of modest public demand, it consumed the $1 billion allocated to it in just 5 days — Congress hastily approved another $2 billion for the program; it was seen as a success at the time. Cash for Clunkers got 700,000 polluters off the road, added $2 billion to the GDP, and created 2,000+ jobs. 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.”

What happened to the junk cars traded in during the program? Were these vehicles sold to a “buy my junk car” place? Did a junk vehicle buyer or buyer of junk cars pick these up? Per www.time.com “to receive federal reimbursement for trading in their cars, dealers must destroy the engine. Once the engine is dead, a recycling lot can take possession of the car. From that time, it has 180 days to sell the pieces of the car. Even though the engine’s a lost cause, everything from the metal to the hubcaps is available to buyers. When the resale period is up, any leftover components must be destroyed, and the government is notified that the car is gone for good. Michael Wilson, executive VP for the Automotive Recyclers Association (ARA), the way dealers must destroy each clunker’s engine, fewer items are salvageable — which means less profit for the recyclers who process the automobiles.” 

Analysis of the buy my junk car project

The www.mnn.com reports finding of a Brookings Institution analysis by Ted Gayer & Emily Parker:

• Cost as much as $1.4 million per job created, and was less effective than other stimulus programs such as increasing unemployment aid or reducing 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 2 to 8 days of gasoline supply for the U.S.”

In a story posted August 8, 2014 by Eric Owens of dailycaller.com “Cash for Clunkers ultimately caused auto industry revenue to shrink by about $3 billion in a year. By lowering the relative price of smaller, fuel-efficient vehicles, the program induced households to purchase vehicles that cost between less than the vehicles they otherwise would have purchased. For one month, the nearly-$3 billion program increased the sales of tiny, low-profit-margin vehicles. In the next few months, though, all sales faded rapidly. Overall, the administrative initiative produced no net increase for the number of autos purchased.” To see the entire post visit http://dailycaller.com/2014/08/09/obamas-economy-in-action-data-shows-cash-for-clunkers-was-an-epic-debacle/

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