By Angie Schmitt, October 31, 2013
CARS stands for "Car Allowance Rebate System," the federal stimulus program better known as Cash for Clunkers.
Turns out paying people to buy cars isn’t a great policy for the
economy or the environment. That’s the determination of a pair of Brookings Institution researchers who evaluated the effectiveness of the 2009 Cash for Clunkers program.
The $2.85 billion program, part of President Obama’s economic
stimulus package, produced only 2,050 “job-years,” according to
researchers Ted Gayer and Emily Parker. That means every year of
employment attributed to it cost taxpayers about $1.4 million — a far
worse cost-benefit ratio than many other stimulus programs.
Between June and September 2009, about 700,000 people took advantage
of the program known formally as the Car Allowance Rebate System (get
it?). The federal government gave each participant a rebate between
$3,500 and $4,500, depending on the estimated emissions reduction
compared to the purchaser’s previous car. New vehicles purchased
averaged about 25 miles per gallon, compared to an average of about 16
m.p.g. for trade-ins.
However, Brookings determined that of these sales, only about 380,000
were a direct result of the program; the other 320,000 participants
would have purchased cars during that time period anyway. And even many
of the stimulated sales would have occurred during the following months
without any subsidy, researchers determined.
“The net result was a negligible increase in GDP, shifting roughly $2
billion into the third quarter of 2009 from the subsequent two
quarters,” said Gayer and Parker.
Cash for Clunkers’ environmental
returns were less than stellar as well. The program resulted in reduced
carbon emissions of between 9 and 28 million tons, at a cost of $91 to
$301 per ton.
“The cost per ton of carbon dioxide reduced by the CARS program far exceeds the estimated social cost of carbon,
suggesting it is an inefficient approach to reducing emissions,” Gayer
and Parker write. The cap-and-trade proposal rejected by the Senate in
2009 would have been far more meaningful, they add.
Cash for Clunkers produced similar environmental returns to the electric vehicle subsidy — which, we’ve reported before, is not such a great use of tax dollars either.
At the time Cash for Clunkers passed, Washington failed to enact a less-expensive, $2 billion proposal to help preserve transit service for millions of Americans.