Cash for Clunkers is a Waste of Government Time, Money

zzbronco

The House approved the “Cash for Clunkers” program yesterday, a $4 billion program that subsidizes new, fuel-efficient cars for people driving clunkers. CNN has more:

The measure would give consumers vouchers worth as much as $4,500 to turn in gas guzzlers and buy new cars that are more fuel efficient.

The House bill would go into effect within 30 days of enactment but it is not retroactive for new purchases made earlier this year.

Clunkers eligible for the program must get 18 miles per gallon, or less, in combined city and highway driving. A $3,500 subsidy can be used toward purchasing cars and vans that are more fuel efficient than the older clunkers by four miles per gallon. A $4,500 subsidy can be used toward purchasing cars and vans that are more fuel efficient than older cars by 10 miles per gallon.

However, cars that have not been insured for the past year or those that are older than 25 years are not eligible to be traded in for vouchers.

Autoblog adds:

The vehicle has to have been insured for the last year and there is no trade-in value beyond the voucher. The program is also available for leases. Dealers are required to provide proof that the vehicle (1984 MY or later) has been crushed or shredded, and the government estimates that around 25 million vehicles are eligible.

Not sure if you drive a clunker? Go to fueleconomy.gov and research your car’s official gas mileage.

Some people will welcome the chance to trade in their old cars, whose resale values have likely plummeted, for something smaller. But I doubt this bill affects enough people to significantly stimulate the auto industry. It’s a friendly gesture to a certain group of people, but little more.

If the government were serious about getting gas-guzzlers off the road in the short term, it would increase taxes on gas. But that wouldn’t be necessary. The market will naturally price out gas guzzlers once the price of oil increases again.

The government is wasting its time with this bill.