Paying people to destroy perfectly good cars. That is Congress and the president in action.
It turns out that “Cash for Clunkers,” which mercifully ends at 8 pm today, doesn’t do much for the environment–contrary to claims made when the legislation was approved. Reports ABC News:
[Christopher] Knittel, the economist at Davis who has studied gas prices and their effects on driving behavior, found that while the program might benefit the economy, it is an inefficient way to take older cars off the road, to lower carbon emissions and to reduce gasoline consumption.
“The fuel economy increase from the trade-in to new car seems large, but it doesn’t have that big of impact on environment,” he said.
Knittle calculated the program will save approximately 270 gallons of gasoline per car, per year. If a total of 750,000 vehicles are sold, as appears likely, approximately 12,000 barrels of oil a day will be saved in a country that consumes 9 million a day.
“It really is just a drop in bucket in terms of gasoline consumption or vehicle turnover,” said Knittle. “Within the U.S. there are about 250 million cars on the road. When we are playing around with only 700,000, it is hard to get any large impact.”
Ed Morse, director of economic research at LCM who has closely studied the energy industry, agreed. “It’s a nice test case, but it has limited application today.”
Morse pointed out that the current national car fleet turns over, on average, every 12 years.
The best point, of course, is the fact that the program mostly caused people who were inclined to buy new cars anyway to either delay or speed up their purchases to qualify for a $4500 government check. Thus, the subsidy won’t even do the auto industry much good since it largely shifted rather than increased sales. At the same time, the program reduced the supply and increased the cost of used cars, which will most hurt people of limited means.
Great work all around!