Wednesday, May 13, 2009

"Cash for Clunkers" No Good in Present Form

Cross-posted from Focus the Nation

Democrats in the House Energy and Commerce Committee have been very busy lately. They’ve been busy, that is, making ACES into what may become a completely worthless bill, in an effort to buy the votes of industrial state moderates in Congress.

A particularly painful example of this is the “cash for clunkers” arrangement that will spend as much as $4.5 billion in taxpayer money to subsidize the purchase of marginally more efficient new vehicles for up to one million drivers. This program creates perverse incentives, does not create cost effective emissions reductions, and is in effect a multi-billion dollar redistribution of taxpayer money to car manufacturers and new car buyers. The new cars don’t even have to be fuel efficient by any reasonable standards.

In the most glaringly awful example of this arrangement’s ridiculousness, someone trading in a large light duty truck for one that gets one mile per gallon better fuel economy (YES, ONLY ONE MPG!), is eligible for a $3,500 voucher toward their new vehicle purchase (YES, THAT’S THREE THOUSAND FIVE HUNDRED DOLLARS!).

This is ludicrous.

Even the least unreasonable part of the arrangement, providing a $4,500 voucher to consumers who swap out an old vehicle for one that is 10mpg more efficient, with a minimum efficiency of 22mpg (YES, ONLY 22MPG!), is an absurdly expensive way to reduce emissions and a waste of taxpayer dollars.

What does this mean in practice? I could swap out my Hummer for a Suburban and get $3,500 for it. Or, I could buy an old clunker for $2,000, then “trade it in” for my new car purchase, get a $4,500 voucher, and in effect save $2,500 for buying the same car I could have anyway.

To make matters worse, this bill discriminates against two classes of people: low-income people, who generally don’t buy new cars if they drive at all, and people who don’t use cars for transportation. Both of these populations are responsible for much fewer emissions than high-income people and drivers, respectively, and often people fall into both categories. This means this policy would take money out of low-income, low-emitting citizens pockets and put it into the pockets of higher-income people buying new cars, that only have to get a minimum of 22mpg, and the car companies that make these cars.

This is a perverse idea, and unless it translates directly to votes to pass a solid bill that manages carbon emissions, and I assume Mr. Waxman and Mr. Markey think it will, because I consider them smart men and shrewd legislators, it must be eliminated.

Alternatively, it could be done well by offering the incentive only for genuinely efficient vehicles, including provisions to be sure car buyers don’t take advantage of the perverse incentive to acquire a “clunker” just for the voucher, and providing some incentive for people who already choose not to drive.

For the record, my 1994 Toyota Corolla gets about 25mpg city and 35mpg highway, and I usually ride my bike to work.

2 comments:

Juliana Williams said...

Alex, I thought that in order to qualify for the tax credit, individuals must have owned their car for at least a year. While it doesn't eliminate the chance for people to buy junk cars, get the voucher and then buy a better car, it should significantly reduce that possibility right?

Ju said...

while this was suppose to be for consumers, it is not. scams abound, buyers beware. check this : http://butasforme.com/2009/07/17/cash-for-clunkers-the-ultimate-bait-and-switch-marketing-tool/