Obama Embraces "Cash For Clunkers" Program to Stimulate Auto Sales
By Greg Johnson March 31, 2009
Late last year, Republican and Democratic members of a House committee urged then President-elect Barack Obama to consider using some of the money in his proposed economic stimulus plan to pay motorists
to take older, dirtier vehicles off of the roads in return for cash that could be used to buy cleaner, more-efficient models.
Obama, it turns out, was listening.
Sandwiched in between the monumental news about General Motors and Chrysler, the president on Monday proposed a fleet modernization program that would include a "generous credit to consumers who turn in old, less fuel-efficient cars and purchase cleaner cars."
Obama said that he will "work with Congress to identify parts of the (Economic Recovery Investment Act) that could be trimmed to fund such a program, and make it retroactive starting today."
We think that makes some sense. A so-called "cash for clunkers" program could stimulate new vehicle sales and help improve the nation's fuel economy picture and reduce tailpipe emissions.
But the concept needs to be carefully thought out and executed so it doesn't become punitive to car collectors, rebuilders and hobbyists.
Problems can develop when regulators have the power to force people to cash out their old cars, or to require the complete demolition of clunkers.
Inefficient, smog-producing engines should be scrapped. But hundreds of other parts - ranging from taillight housings to seat frames - often are recycled by collectors, enthusiasts and low-income car owners who are trying to keep their means of transportation.
We're glad that the Obama administration sees the wisdom of avoiding legal fiat and using market forces instead to encourage owners to get their old cars off of the roads.
Evidence suggests that such a program would work. The Energy & Environment Daily newsletter (subscription required) today reported that new vehicle sales in Germany rose by more than 20 percent after that country offered consumers about $3,000 in rebates to junk older vehicles and buy new.
Congress seems willing to work with Obama.
In January, U.S. Senators Dianne Feinstein (D-Calif.), Susan Collins (R-Maine), and Charles Schumer (D-N.Y.) introduced legislation that would create a national "Cash for Clunkers" program. The legislation calls for a credit of $2,500 to $4,500 to consumers who turn in fuel-inefficient vehicles to be scrapped, and purchase a more fuel efficient vehicle.
The credits would be available to owners of vehicles that get no more than 18 miles per gallon. Cars and trucks would have to be in drivable condition and have been registered for at least the past six months.
Supporters in the Senate say that the program would run from 2009 to 2012 and prompt the early retirement of as many as one million vehicles per year.
Of course, not everyone favors such a program.
The Specialty Equipment Manufacturers Assn. maintains that "scrappage programs hurt thousands of independent repair shops, auto restorers, customizers and their customers across the country."
The Automotive Aftermarket Industry Assn. also objects - on the grounds that retired vehicles would "likely be sent to landfills, creating more pollution, not less."
(Some might wonder if folks who repair old cars for a living might have another reason for not wanting those vehicles retired. Read more about the association's objections at their fightcashforclunkers.org website.)
And, since we're talking about a stimulus bill, it's important to note that a "cash for clunkers" program would benefit the broader economy.
The Auto Futures Group, an industry consultancy, suggests that 225,000 auto sector jobs in the U.S. would be created, or retained, for every one million cars and trucks scrapped in such a program.
Greg Johnson, Contributor
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