Cash For Clunkers: Junk Legislation?

June 10, 2009

As our own Richard Read reported this morning, there's news from Capitol Hill that the "Cash For Clunkers" legislation is moving forward.

Who could be against a program that speeds up the elimination of bad, evil vehicles, helping bunnies and wild flowers to breath more easily across the globe? As it stands, the idea behind the program would have the Feds (via the taxes paid by working Americans, profitable American companies, and others that get hosed by existing or new taxes) send new car buyers a check in Lee Iaccoca fashion when they buy a new high-mileage car after trading in an older vehicle that gets poor mileage.

Currently, the definitions for mileage and the exact amount of the incentive checks are under debate as the bill moves from the House to the Senate.

Beyond the green arguments for the bill, arguments are being made that it will have a stimulating effect on the automotive sector. While I personally like this kind of argument better than the former, it still feels like another transfer of wealth, but that's another debate altogether.

Unbelievably, there are those opposed to the legislation. Before we get into arguments that oppose the legislation, let's consider a few things; experts generally agree that it takes about 18-20 years for the U.S. national fleet of approximately 225 million registered vehicles to "turn over." For example, technology that is new today will permeate the fleet in about 20 years. Congress wants to accelerate the natural turn over with rebate checks from the Cash for Clunkers program.

Some 11 European countries have similar programs, and one German city is has even instituted rebate programs for bicycles (that would go over great in Los Angeles, eh?). The auto portion of most EU programs is similar. In German program, for example, the government offers consumers 2,500 euros (about $3,400 USD) toward the purchase of a new car regardless of the CO2 emissions of the new model, so long as the scrapped vehicle is at least nine years old. The program also permits German consumers to replace a more fuel-efficient older car with a less-efficient newer model.

Like the U.S. proposals, the European-style programs warrent scrutiny. The European Commission staff warned that most EU programs focus on age rather than actual emissions; that the cars collected may simply be resold in other countries; and that the scrapped cars were at the end of their useful lives anyway and worth far less than the subsidy. All good points if the program is supposed to benefit the environment and the economy.

Just like people who bilk the well-intentioned U.S. Welfare programs, Cash For Clunkers may offer plenty of opportunity for people to make money off the system (and remember whose money it is ... yours). Consider just the number from above; there are 225 million registered vehicles in the U.S. That's a lot of cars sitting around not being driven that could be turned in (with no genuine benefit to the environment). The result is that U.S. tax payers would pay to take a practically non-polluting, unused vehicle out of service. I don't see the wisdom in that, but I can't figure out a way to prevent it.

But even before discussion starts on potential ways to scam the program, there are more obvious questions. For example, why would we spend tax dollars to destroy good used cars? Excellent question, especially when these lower-priced cars provide transportation to an entire class of drivers who cannot afford to drive something newer, even with a generous Federal grant. This will decrease the mobility options for a major portion of U.S. drivers. While I write this with a smile on my face, what will illegal aliens drive if the program goes through and the supply of really cheap used cars dries up?

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