Stimulus Keeps America Motoring
Private cars are not going anywhere anytime soon but I like to see policies designed to take away the massive advantage the car has over say mass transit.
Stimulus funds, as we know, are going toward many road projects. Yes, the road projects were “shovel ready” but only because that is all we seem to plan for.
The cash for clunkers program (officially the car allowance rebate system) has been well received:
According to a survey of car dealerships and 2,200 consumers by CNW Research, the average fuel economy of vehicles traded in last week was 16.3 miles a gallon, which is not much less than the 18 m.p.g. needed to qualify for a government rebate of $3,500.
The relatively small differential suggests that consumers have not been turning in the oldest, dirtiest and least fuel-efficient cars, but instead have been getting rid of their second and third cars, according to Art Spinella, who ran the survey.
The vehicles that consumers bought with their credits had average fuel efficiency ratings of 24.8 miles a gallon, he said.
Lawmakers hoped the cash for clunkers program, formally known as the Car Allowance Rebate System, would reduce America’s dependency on imported oil. But the early results of the program suggest that may not happen. The vehicles turned in were driven about 6,000 miles a year, he said. If the new vehicles are driven about 12,000 miles a year, the rough annual average, then consumers will actually use more fuel, not less.
“The energy independence argument did not ring true, at least so far,†Mr. Spinella said. (source)
There is much debate about the program. True, 2nd & 3rd cars are used as the trade in vehicle.  The new car will become the primary vehicle and the old primary vehicle will become the new secondary car in the household.
Some say the fuel efficiency requirements should have been higher. I agree. My guess is if they had been too high many of the new vehicles would have been foreign rather than domestic makes. Domestic makers simply focused too heavily on trucks & SUVs.
My 2004 Toyota Carolla, built in California, has a combined EPA of 28mpg. It is worth more than the rebate anyway. A 1994 Carolla still wouldn’t have qualified due to a combined EPA of 25mpg.
I looked up many other cars at fueleconomy.gov to see if they qualifed based on MPG. A 1994 Ford Crown Victoria just barely qualifies but a 1994 Ford Taurus does not. On one hand I’d like to see 20mpg cars be replaced with 30mpg vehicles. On the other you have to draw a line somewhere.
And clearly there has been no shortage of qualifying trade ins. You have to wonder if buyers are going to cheap used car lots to purchase a $1,000 clunker so they’d have a vehicle to qualify for the $4,500 rebate?
The clunker program is certainly a fast way to stimulate the economy. But it also shows how important the auto industry is to our economy. How will we ever change that fact?
At one time the St. Louis we made streetcars used by many cities. No reason why the shuttered Chrysler plant in Fenton couldn’t build modern low-floor streetcars for use in the Loop Trolley line and in many others. Someone has to build the trains for the high-speed rail lines being planned in the US.
Stimulus money needs to make it easier to use our private cars less often. Where is the rebate for trading in a clunker and buying a 90mpg scooter as a replacement? Or a 10-year transit pass?
– Steve Patterson
I’d like it better if the clunker rebate were funded by an increase in the fuel tax, and not just from unspecified (and likely borrowed) funds. Many people, like me, are cut out since we’ve always purchased higher-MPG vehicles. What we’re doing here is essentially rewarding bad behavior.
“You have to wonder if buyers are going to cheap used car lots to purchase a $1,000 clunker so they’d have a vehicle to qualify for the $4,500 rebate?”
Steve, you need to research the details of this rebate before you post, legislators aren’t stupid. You have to have owned the car for at least 1 year to qualify it for “Cash for Clunckers”.
“Rewarding bad behavior” exacerbated by using borrowed funds is exactly correct. The working poor who need cheap cars for mobility are being further squeezed and extrapolating historical data leads to the conclusion that the higher mpg will be offset by driving more miles. The continuing subsidization of private motor vehicles is further proof that this culture is seriously hooked on fuelish behavior, at all costs.
You must own the car for a year and have it insured for a year. (Chrysler also doubled the incentive) What most critics don’t talk about is that the poor family that has an old minivan or large car which might get 11 mpg, is now replacing it with a car that might get 32+ mpg and under normal conditions no car dealer would be giving them $ 4,500 for that trade-in. Isn’t this a step in reducing fuel consumption?! I really don’t see this as a horrible program.
I took advantage of this program last week. I traded my foreign-made 1999 Crown Victoria (officially 18mpg, real life 14mpg) which was in great condition and drove fine, but was probably worth $1500-$2000 max in resale, for an American-made 2009 Camry Hybrid (officially 35mpg, real life so far 37mpg with less than 1000 miles on it) which I got for a grand total of $9000 below sticker price.
In my case I had been looking into buying a new car for a year, and my plates on the old car expire at the end of the month. It was perfect timing. Without the extra $4500 I probably would not have gotten the Camry, and possibly bought a used car instead, most likely a car that almost surely would have gotten worse fuel economy.
So, environmentally the new car when driven is surely better than the old one. I don’t know how much pollution the manufacture of the new car created versus if I had continued to drive the old one.
Economically I put money in the pocket of a car dealer for a car that had been sitting on the lot for half a year. Eventually, when the excess inventory is sold down, they’ll need to do more manufacturing (not just for cars but for all products). In the case of the Camry Hybrid, that manufacturing is done in Kentucky.
And as another commenter pointed out, you couldn’t go buy a junker and trade it in. You had to show insurance cards going back at least a year and registration papers going back at least a year as well. This was a problem for a lot of people since most people throw away their old insurance cards or registration paperwork when they get news ones.
My problem with the program is that is takes money from the many and gives it to the few. The program also is prompting people who were already going to buy a new car to do so sooner, basically just shifting the sales from a future quarter into this quarter, at taxpayer expense.
Cash for clunkers for not for new mass transit systems.
This program is absolutely ridiculous. I can not believe we are disabling working vehicles. The fact that people even try to pass this off as environmentally sound policy blows my mind. The very first rule of conservation is use something until it is absolutely unusable. Do you have any idea how many miles these new cars will have to be driven to offset the energy needed to manufacture them in place of still driving the old car?
Just wait until the end of the fiscal year, when the actual units sold is no higher than it would have been without the program. We have, as a society, just subsidized the purchase of 250,000 new cars. How much further can we get from an era of personal accountability and achievement?
I make the wise financial decision to drive a paid off vehicle, but am forced by my government to pay $4500 for my neighbors car? What kind of F’d up alternative universe did I just wake up in? I’m getting royally pissed off.
According to unsourced info found online, over the average car’s life span of about 12 years, 90% of the greenhouse gases from a typical car come from driving, while 10% are from the manufacture of the vehicle. That may vary depending on if the car is made with recycled materials like steel, for example.
So based on my mental calculations I figure if I drive the new car for more than about 5 years it’ll still be environmentally better than if I had somehow managed to keep the old one going for that long. (I plan on driving it for as long as it’ll get me from point A to point B without requiring repairs that cost more than the car is worth.)
The $4500 I got for my old car is more than I paid for it in the first place six years ago. Bonus.
Of course that $4500 pales in comparison to the local tax breaks the car companies (and every other big business) have been getting forever, and the federal bailout/buyout… but I thank you for pitching in $0.00001 toward my new car none the less.
Just read on CNN that 85% of the vehicles traded in so far have been SUVs and trucks, but 60% of the new vehicles purchases have been cars. So at least there will be fewer SUVs out there.
Thanks for the “unsourced” info. Very helpful.
I can’t believe people are ok with this B.S.. How far in debt do we want our future generations to be? I can’t help but think of the old Saturday Night Live skit in which the self help budget guy puts out a new brouchure that has a totally new concept called, “don’t spend money you don’t have”. Followed by, “Use cash, and you won’t have to pay things back with interest”.
We have been addicted to debt in this country for far too long, and it is only getting worse. Who is going to pay for this????
Well Kruse the last administration spent an insane amount of money on a war with a country that wasn’t even the correct country, whose going to pay for that? This program is a drop in the bucket, chill out.
I am in complete agreement with W Kruse. From the bank and auto bailouts to this “cash for clunkers” deal, this administration just keeps piling on the debt. Quite frankly, I’ve become speechless over the amount of excessive spending [especially in such a short period of time]. Not to mention that they’re just destroying these cars–not parting them out or anything–blow the engine and to the crusher they go. Even though I object to the entire deal, parting them out would give more people jobs and it would provide for less expensive parts to become available–both of which would stimulate the economy.
What about the people who already drive fuel efficient cars? I’ve been driving one for the past 8 years that achieves a combined 30 mpg. Do I get some type of discount or rebate?
As W Kruse pointed out, we are essentially paying a substantial amount for someone else to purchase a new car. If the excessive spending doesn’t end, where’s the limit? Are they going to start giving homes to the poor?
This cash for clunkers deal is a pretty good emergency measure for our economy….it’s also pretty good in the moderate-term to have a sudden jump in efficiency. Environmentally-speaking, the rewards are dubious in the short-term, but in the long term it does help set the basis for hundreds of thousands of people to put fuel efficiency as a top priority when buying a car.
It’d be if the government handed out “veggie coupons”, getting hundreds of thousands of people to swap out hamburgers for veggie burgers. At the very least it would get a large number of people into the habit of eating vegetarian….hopefully continuing the practice beyond the initial subsidization. (I am not a vegetarian, by the way, just using it as an example).
Its a small cultural-alteration step. It’s not good enough, but it’s a start. Hopefully there will be promotions to get people riding buses, bikes, and trains in the near future.
a.torch – I didn’t like it when Dubya spent all that money on a stupid war and I don’t like that we’re spending three billion dollars to subsidize the car culture. Why do you assume everybody that doesn’t want to spend billions on new car subsidies must have been a supporter of the last president?
Back on topic…the cash for clunker program is a waste of money that only encourages people to spend more time in their new cars.
a.torch, W’s fiscal policies moved me to a moderate stance and definitely was a consideration in my voting last fall. However, you are losing fact that Obama’s administration current budget plan using inflated gdp growth will accumulate more debt and probably exceed W in one term, four years, then it took W in two terms, eight years. Voters in 2010 will not be kind if their is back to back years of trillion plus budget deficits. Nor will the voters accept the mantra that it is all W’s fault come 2012. That is political fact.
Back to topic – Cash for clunkers could be used as the definition for Bailout Nation. It is even more ironic that the last report I saw stated that foriegn car companies represent 53% of the sales. We can accomplish better results on fuel efficiency, transit use and curbing emmissions by charging the proper amount of gas tax. As it stands now, they will have to bail out the Highway trust fund with $6-8 billion for the reminder of this fiscal year alone (more borrowed monies). They will have to find another $25 billion if the current multiyear highway bill at current spending rates is extended another eighteen months as Senate is proposing. So true costs are beyond the $3 billion that will be spent for the sake of the auto industry. We will essentially subsidize highways ten times the amount just to keep the gas price affordable the next 24 months. That doesn’t even count what was loaned to GM and Chrysler already.
The cars are not necessarily being destroyed. A great number are being sold to junk yards and everything but the engine can be re-sold. The list of facilities is on the CARS website. I imagine only the cars whose value as scrap metal exceeds its value as a parts car will be crushed or shredded.
I love it when I mention current spending how someone can’t help falling over themselves to mention the last administration. As though I thought that was OK. I didn’t approve of it when the last admin. spent money we didn’t have, and I certainly don’t like it when this admin. is doing the same thing. Change my a@@; the only thing that changed was how much faster we can blow through the money we don’t have.
Paul-
The most valuable part of a scrap car is the engine. It typically goes for around $300. That is the one thing that can’t be salvaged. A running car is worth a lot more than the sum of the parts, especially at a scrap yard.
This topic is a perfect example of why you can’t believe everything you read. There is a lot of people passing off opinion as fact here. Then to compound the issue, we’re all too busy trying to pick apart one another and point fingers at their political affiliations, rather than staying on topic.
Before I hit on the clunkers, one more point about politics. Lets stop with this blaming one party or the other. They BOTH have equal stake in everything that happens and I don’t think it takes too much to see that 99% of the time the best answer is one that both parties compromise on. It’s amazing how we argue like children when it comes to a subject that we control on one day out of every two years.
In my opinion I don’t quite get the point of the clunkers program. I get the intent, and I like the idea of taking a 15mpg car off the road, or even an older model car that might have a larger enviormental footprint. Yet, the margin of gain for the new car is not nearly enough. I also understand subsidizing the two car companies that we (Americans) now own part of. I don’t agree with it, but hell, if I own it, I want it to succede. In that light, GM and Chrysler don’t currently have the stock available in cars that meet the requirements and there is no extra incentive to buy one of those brands. I can’t blame anyone for buying a Toyota, Honda, or Ford because I would do the same, but I think that wasn’t the intent of our handout happy government.
From an economic standpoint I just don’t feel that it’s going to have a positive effect on sales for the year and it certianly will not get GM/Crysler building cars in America again. So in the end, those that were in the financial position to take advantage of the program, get a sweet credit and then everything goes back to the way it was. The only winners are the PR folks in DC, because they can spin the hell out of this.
About our budget deficit and national debt:
1. With any economic activity, you need to “spend money” to make money. You need to invest in order to expand production. I see little problem with that end of the solution, even if I don’t like where the investment is being made.
2. The nation’s debt doesn’t matter so much as a whole amount, it matters in relation to its GDP (and even then there is some qualifications). It wouldn’t matter much if our debt was 100 trillion dollars if our GDP was 100 jillion, so to speak. We are fast approaching WWII levels of GDP to debt, but we have several times the GDP of 1943. It’s crazy to think we could even begin to attain that proportion of spending, but this appears to be a rather expensive world with rather expensive problems.
Despite our increased government spending, inflation has not been picking up speed. Inflation, typically, is what is considered the prime negative result of increased government debt. If anything, we almost hit a period of deflation, something that’s pretty much unheard of.
At some point, taxes will have to be raised, and Obama has stated bluntly that taxes on the rich are going to be going up. So, even though they don’t have the money to pay for it now, once they programs and plans have gone through I expect them to start raising taxes to pay for it all.
Tax and spend, or spend and tax, it’s all the same.
The energy needed to produce a new car is roughly equivalent to the gasoline used in traveling 50,000 miles. So this program is actually a big loss for the environment.