Cash-for-clunkers

The “cash-for-clunkers” plan moving through Congress is yet another boondoggle cloaked in environmentalism. The current legislation would provide a $3,500 subsidy to anyone trading in a car getting less than 18 miles per gallon as long as there is at least a 4 mpg improvement. A 10 mpg improvement would yield an extra $1,000.

Average fuel economy requirements are about 27 mpg so many purchases would drag the US average lower. At its worst, a driver would be paid about $1,200 per barrel of oil saved in a year. The plan is watered down even more for light trucks, hundreds of thousands of which sit on the sales lots of US carmakers. Only a 2 mpg improvement is required so many getting well below 20 mpg would qualify.

A far more sensible draft of the plan provided $4,000 for trading in the same type of cars for others that exceed average fuel economy in their class by 25 per cent. The chief problem with this seems to have been it would encourage buying products not made by Detroit-based carmakers – a cause that apparently trumps the environment. Of the top 10 cars for fuel mileage sold in America, four are built by Toyota, two by Volkswagen, one by Honda, one by Smart and only one by US–based Ford.

The new plan is also economically regressive. By requiring cars to be scrapped, vehicles typically used by working poor in a country with patchy public transportation would vanish or rise in price. Important spare parts could not be recycled, making repairs of old vehicles already owned more expensive for the poor. And the already dubious environmental merits of the plan ignore the energy consumed in manufacturing a new vehicle as part of the equation. It is this plan, not clunkers, that should head for the scrap heap.

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