‘Cash for Clunkers’ — It’s a Lemon
The new automotive incentive program was quite clearly designed by the geniuses who brought us the tax code.
June 22, 2009 - 12:20 am
After investing billions of taxpayer dollars in two domestic automakers to help them survive the dramatic downturn in car sales along with an enduring recession, Congress and the Obama administration want to help jumpstart the industry. The battery cables of choice for this operation — HR2751 Consumer Assistance to Recycle and Save (CARS), also dubbed “Cash for Clunkers” — is roughly patterned after a similar automotive stimulus scheme in Europe.
If it worked on the Continent, it must be a good thing, as the current beltway logic asserts.
The idea of encouraging people to retire their old relics of transportation for new vehicles should have merit, especially if it was a simple financial incentive. Since car dealers need buyers, auto manufacturing plants need to produce, and nearly all new vehicles are cleaner and safer then their predecessors, this seems like a splendid idea. And it might well be, if it was that simple.
Enter our elected leadership who have decided that the goal of increased fuel economy should be added to the jumpstart scenario. Heaven forbid that some irrational buyer, say a couple with a new or growing family, trade their fuel-sipping subcompact for a (horrors) midsize SUV or crossover. So after months of congressional deliberation, a bill emerged that is sold as green stimulus. To collect up to $4,500 green dollars, your old guzzler must get less than 18 mpg combined city/highway fuel economy and the new vehicle must deliver a 10 mpg improvement.
Before you buy a $500 heap to convert into $4,500 of taxpayer largess, the Cash for Clunkers program applies to a vehicle that has been registered in your name for at least a year. What’s more, the car or truck must be a 1984 or later vehicle to qualify. If the old machine meets those requirements but the new vehicle you’ve chosen isn’t 10 mpg better, there’s a $3,500 credit available if the improvement is at least 4 mpg.