Enjoyable and informative article from Denver Post columnist David Harsanyi about the reasons why "Cash for Clunkers" is a failure, no matter how much Congress wants to make it look like a success. I'll pull out the best parts, beginning with this summery of the program:
"Here's an idea: Let's give $50,000 to anyone looking to upgrade to a brand-spanking-new, environmentally friendly home. All we ask in return is that you burn your previous residence into a heap of smoldering cinder."
There are two reasons why this bill was passed (and re-upped by the government this week): environmental benefits and economic stimulus. Harsanyi argues that it has failed on both fronts:
"Now, some of you radicals may have an ideological dilemma with a government handing out thousands of dollars to citizens making an average of $57,000 a year so they can upgrade their perfectly serviceable vehicles. Turns out, though, that by nearly any criterion, including the ones offered up by President Barack Obama, this populist experiment is an unmitigated fiasco.
To begin with, building a new car consumes energy. It is estimated that 6.7 tons of carbon are emitted in the process. So a driver who participates in the "cash for clunkers" program would need to make up for that wickedness."
So that covers the supposed environmental benefits. Here's why it does nothing to help the economy:
"As an economic stimulus, the plan is equally impotent. As James Pethokoukis, a columnist at Reuters, succinctly explained, 'The program gets much of its juice via stealing car sales from the near future rather than generating additional demand'."
The point of a stimulus should be to create new demand, not to move existing demand around to score political points."
The only potential benefit to shifting that demand forward would be to help the ailing American car companies right now (of course they will be hurt by the lack of demand in the near future, but I can buy the validity of the argument that they needed those purchases immediately to survive), but over 50% of the cars being purchased through the program are foreign. Additionally, even though the Ford Focus is the top-selling car purchased through the program, numbers two through five are made by either Toyota or Honda.
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I'm not convinced. I understand that, economically, there are some problems here--it WOULD be great if a stimulus plan generated new demand, and I agree that these are just the cars people would be buying in the near future anyway. I think there is something to be said, though, for the effect this could have on consumer confidence, which would only help the market right now, but we both know neither you nor I are the right ones to address that.
ReplyDeleteBut in terms of the environmental effects, Harsanyi jumps to conclusions without fully looking at things. His argument that only a SLIVER of cars will be effected by this is dismaying in that he seems unsatisfied with gradual change--when, as any environmentalist could tell you, small steps are really the most realistic way to help mitigate our environmental programs.
According to the carbon footprint calculator at terrapass.com (look, I cite figures. Unlike your source article, where the per capita income comes out of nowhere), a 1999 Ford Explorer, a popular car in its heyday that I'm sure is seeing some trading in right now, emits 9.17 tons of CO2 each year; upgrading to a 2009 Ford Focus cuts down to 5.25 tons of CO2 per year. As long as a driver keeps their car for TWO YEARS, they have successfully offset the CO2 output figure you cite.
These numbers assume putting 15,000 miles per year on to the car, which seems an average figure. Terrapass also informs us, passed on the fuel efficiency standards of these models, that the Explorer would use 938 gallons of fuel per year while the new Focus would use 536. That saves 400 gallons of gas per year for the drivers of those new cars, which at an average of $2.55 per gallon (EIA statistic), saves those families $1020 each year. This now means more money for those families could choose to put into other sects of the economy, while also reducing oil consumption by 32,000,000 (32 million) gallons per year, considering that the same article you cited last says 80,000 cars have been upgraded in this program (which sad to say, apparently offsets less than one day of our nation's oil consumption).
My point here is that the program has obvious problems but also some obvious benefits. To my mind, a more important problem is the class bias here--this deal is only good on new cars, not a "certified pre owned" model with good fuel economy which may be more reasonable for a family fitting this recession (I know, used cars don't rev up production...). I think this program has brought into clear light the difference fuel efficiency, and other small changes, can make for both the economy and the environment, and for that reason is admirable. To call it a failure is unbelievably harsh, and while I admit there are flaws in the plan, I have not been convinced by a single article or report that this program is anything so cut and dry as either a failure or an outright success.
(Also, I have never seen ANYONE cite the US per capita income at $57,000--no reputable source puts it that high. I would be very interested to see where his numbers came from.)