Saturday, July 25, 2009

Cash for Clunkers

Cash for Clunkers didn’t start out as a bad idea. It took Congress to make it one. Originally intended to provide an incentive for replacing old, less efficient cars with newer, cleaner, more efficient ones, the program now reeks of bacon and is no different than any other pork laden half-measure enacted by Congress over the years.

Known as C.A.R.S., for Consumer Assistance to Recycle and Save, the program provides vouchers towards the purchase of a new vehicle. To get the money, you have to trade in a car that gets less than 18 miles per gallon and is between eight and 24 years old. You also have to buy a new vehicle. Used vehicles, including program or certified ones are excluded.

My family owns both a car and SUV. Both vehicles are old enough for the program but get better mileage than the 18 mpg required for the vouchers. This problem is typical for most cars and small SUVs made in the last twenty-five years. The only way to really qualify is to own a large truck or SUV. If the program encouraged people to trade out of a large truck or SUV and into a smaller one, it would make sense. But it doesn’t. To get the voucher, all people have to do is trade their large truck or SUV for a new, similar vehicle that gets 1-2 more mpg. This is an irresponsible waste of taxpayer money. With last year’s high gas prices fading from memory, it encourages people to buy large SUVs, artificially driving up demand and encouraging GM and Chrysler to continue building the same vehicles that landed them in bankruptcy court.

There is another solution. Consumers can donate their clunkers to charity and buy used vehicles. More and more charities are turning to car donations as a way to raise money and the donations are tax deductible. Used vehicles no longer carry the stigma they once did and can be purchased from any individual or dealer, including former new car dealers struggling in the wake of the GM and Chrysler bankruptcies. Finally, consumers would save more money with this approach than with Cash for Clunkers and there are no restrictions. It provides a way to recycle and save without the clumsy, half-baked government approach.

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