Gentlemen, Start Your Clunkers

A stimulus package launches with low hopes for qualitatively changing the pace of car buying and little real expectation of cleaning up the air.
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It was a record race for cars described as "clunkers" — 30 days from a bill signing to administrative regulations on the street. The new "cash for clunkers" program, aimed at getting gas hogs off the highways and autoworkers in the plant, kicked off today with Transportation Secretary Ray LaHood telling Americans to start their engines.

"With this program," he is quoted in the official Department of Transportation press release, "we are giving the auto industry a shot in the arm and struggling consumers can get rid of their gas-guzzlers and buy a more reliable, fuel-efficient vehicle. This is good news for our economy, the environment and consumers' pocketbooks."

The base idea for the federal legislation is sometimes traced to Princeton economist Alan S. Blinder and an op-ed published a year ago today in The New York Times. Blinder has always pointed out that the concept predated his prescription, and even the "cash for clunkers" tag was never his, but his elegant statement of the principles got lots of mileage.

Under the Car Allowance Rebate System — hey look, the acronym spells CARS — new car buyers trading in a gas-guzzler (i.e. a car or truck receiving less than 19 mpg city and highway) and purchasing a fuel-efficient vehicle can receive up to $4,500 discount courtesy of a billion dollars Uncle Sam allocated. And that's real money you get to keep, not like that first-time homebuyers tax credit you have to pay back over time.

There are more rules, of course (it is a government program), and Monday's dog-and-pony event — make that Rover-and-Mustang event — was to release those rules. The program technically went into effect July 1 without any rules. (Did we mention this is a government program?) Anecdotally, lookers are filing into showrooms across the U.S., although it remains to be seen if lookers equal buyers.

Miller-McCune.com took a peek at the program the day it technically started by examining the German experience. One issue there is that the "clunkers" that were be scrapped often looked pretty snazzy to poorer drivers, and so leakage of gross polluters into Eastern European was a concern.

There are critics on the American side of the pond, too. The Wall Street Journalgripes for example, that the billion dollars is too little to really jumpstart ailing Detroit, and that fuel-efficient cars weren't ever its strong point to begin with.

Plus, cars need only get 4 miles better fuel efficiency, and SUVs and trucks a mile better, to qualify. So we're not comparing Hummers to Minis, but more Hummers to other Hummers.

Meanwhile, the Los Angeles Times in cash-strapped California suggested that the price reduction on the new car meant less sales tax.

And Edmunds.com, which makes a business out of valuing cars, calls the program "a non-event."

"The incremental sales will be limited and at a considerable cost," its CEO, Jeremy Anwyl, was quoted in a release. "In effect, we are paying consumers to do something most would do anyway. So as a stimulus, the program fails. One could make a slightly stronger argument about the environmental benefits, but even there, the program could have been better designed."
Oh well, perhaps it's a case of lighting a single candle — a low-soot, low-smoke renewable resource candle, that is — than cursing the darkness.

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