Another problem with this program is it specifically prohibits trading in a car more than 25 years old. If there are indeed cars we would like to get off the road, either for fuel inefficiency or for emission deficiencies, then this program should be targeted to those vehicles which are at the end of their useful life and are not as fuel-efficient on average as vehicles produced today. These are the real clunkers. Only a federal bureaucrat could come up with a scheme restricting participation by those people who could benefit the most.
The third problem is that a lot of the vehicles being turned in are like my son’s, which are perfectly good vehicles that still have a long useful life. This is where the economic ignorance of our elected leaders gets even more astonishing.
While looking at throwing $2 billion of additional money at this program, a couple of senators (who will go unnamed to protect the guilty) stated that they supported the program because the new cars being purchased had higher fuel efficiency than they expected.
That ignores the two most important factors. First, there is no consideration of the fuel efficiency of the vehicles being taken off the road and destroyed. More importantly, there is no heed paid to the immense amount of energy used to produce the replacement vehicle. The steel, aluminum, plastic and cloth in a car all are part of a manufacturing process that eats energy during the actual assembly of the vehicle. There are thousands of parts that take energy to produce. Taking thousands of vehicles off the road prematurely without recognizing the cost of that energy grossly overstates the true tradeoffs. Saving a few miles per gallon in fuel efficiency will barely offsets the loss of the energy used by premature destruction of a perfectly usable vehicle. The program is like amputating an arm because of an infected finger.
So the government is spending $3 billion to provide very little benefit to the car buyers and to save little -- if any amount at all -- in overall energy costs. The only point I have heard that makes sense came from someone who is usually confused about economic issues – Juan Williams of NPR. He smartly stated that there is a positive perception being conveyed to consumers about spending. Many people have locked down their spending as a reaction to the uncertainty of the economic slowdown. If this program resulted in a more positive trend for consumers then we would all benefit.
Aside from the potential psychic benefit to the consuming public, Cash for Clunkers is just another boondoggle foisted upon us by people who have no clue how our economic system works. The best thing you can say about it is it is a whole lot smarter than the rest of the stimulus plan.