“Cash for Clunkers” was born with Obama’s administration as a component of his stimulus. Its fate is a window into why the recovery has been extraordinarily weak, and into what happens when progressives’ clever plans collide with recalcitrant reality.
Consumers could trade in older vehicles and receive vouchers toward the purchase of a new, more fuel-efficient car. The vouchers were worth $3,500 or $4,500, depending on the difference in fuel economy between the trade-in and the new purchase. The program’s purposes were economic stimulation and environmental improvement.
Now a study by Ted Gayer and Emily Parker, published by the Brookings Institution, a mildly liberal think tank, concludes: “The $2.85 billion in vouchers provided by the program had a small and short-lived impact on gross domestic product, essentially shifting roughly a few billion dollars forward from the subsequent two quarters following the program.”
Most of the 677,842 sales were simply taken from the near future. That many older vehicles were traded in — and, as required by law, destroyed. Gayer and Parker accept as reasonable an estimate that the cost per job created by the program was $1.4 million. Although the vouchers did not come close to covering the cost of the new cars, voucher recipients seem not to have reduced their other consumption. This, say Gayer and Parker, suggests that participants in the program “were not liquidity constrained,” which is a delicate way of saying “there was no change in other consumption patterns,” which is a polite way of saying “cash for clunkers” merely caused people to purchase vehicles “slightly earlier than otherwise would have occurred.”
Because the program was not means tested, it had only a slight redistributional effect of the sort progressives favor: Voucher recipients had lower incomes than others who bought new cars in 2009. Against this, however, must be weighed the fact that the mandated destruction of so many used vehicles probably caused prices for such vehicles to be higher than they otherwise would have been, meaning a redistribution of wealth adverse to low-income consumers.
As for environmental benefits from Cash for Clunkers, the reduction of gasoline consumption was small and “the cost per ton of carbon dioxide reduced by [the program] far exceeds the estimated social cost of carbon.” But it was — herewith very faint praise — more cost effective than the subsidy for electric vehicles or the tax credit for ethanol.
Cash for Clunkers lasted 55 days and ended with confusion that was a preview of things to come. The New York Times (Aug. 1, 2009) explained the final surge of demand for clunker funds:
“Around the country, dealers had put off the laborious task of applying for the rebates ... which requires entering the 17-character identification numbers of each vehicle to be scrapped, scanning images of proof of insurance and filling out other paperwork. The computer system was overloaded, according to the dealers. They said they would finish one page in the application, hit enter and nothing would happen. Eventually a message would appear notifying the dealer that the page had ‘timed out.’
“Tom Frew, the business manager at Galpin Motors in Los Angeles, said that he needed 35 tries to register just one of the company’s 11 dealerships on the day that the program opened because of problems with the government website. On Friday, he spent an hour processing just one rebate application, he said.”
The recovery from the recession began in June 2009; 53 months later, vehicle sales still have not yet reached the pre-recession peak. Cash for Clunkers was prologue for the government’s vastly more ambitious plan to manage health care’s 18 percent of the economy.
The present, too, is prologue. There currently is heated debate about the Common Core, whose advocates say it merely involves national academic targets and metrics for primary and secondary education. Critics say it will inevitably lead to a centrally designed and nationally imposed curriculum — practice dictated by targets and metrics. Common Core advocates say, in effect: “If you like your local curriculum, you can keep it. Period.”
If you believe this, your credulity is impervious to evidence. And you probably are a progressive.
George Will is a columnist for the Washington Post.