Sunday, August 2, 2009

The “cash for clunkers” program stalled less than a week after it started. The $1 billion in funding was intended to last until Nov. 1, but the money is all gone. Not only is the program broke, the fine print reveals that the real piece of junk is the law.

The Car Allowance Rebate System — cash for clunkers — is designed to stimulate the economy while providing other supposed benefits by reducing greenhouse gases. To encourage new automobile sales, the government gives $3,500 or $4,500 to motorists when they turn in an older car to buy a new ride. However, if a driver were even mildly conscious of gas mileage early on, forget it, she won’t get anything. It only rewards those who bought gas guzzlers.

The Environmental Protection Agency spent a month evaluating 30,000 vehicle models made between 1984 and 2004 and decided that only about 8,000 qualify. Those cars get 18 miles per gallon or less. The results don’t make a lot of sense. For instance, the Toyota Camry got too many miles per gallon. Ford Taurus sedans, except for some with V8s, don’t qualify, but if you happen to have a Ford Taurus wagon, there are some models in some years that do. Among cars made in 2004, only six models are listed as eligible — all of them trucks or sport utility vehicles.

Oddly enough, it does not matter how big a difference in gas mileage there is between the old and new cars in this tradeoff. Replacing an 18 mpg car with one that offers 22 mpg gets a subsidy. But you cannot get any subsidy if you replace a 19 mpg car with one that gets 42 mpg.

We are against taxpayer money going to subsidize the purchase of new cars, but if it is done, the deal ought to make some kind of sense. If improving gas mileage is the goal, a sliding scale that varied the subsidy with the difference in gas mileage between old and new cars would seem reasonable. If reducing emissions from older cars is deemed important, the subsidy could be larger for trading in older heaps.

There are other confusing details of the clunkers program. One is that used cars worth more than the $3,500 or $4,500 subsidies are not eligible. In the longer scheme of things, that is a disincentive to buying new cars more regularly because the value of a vehicle has to be very low for someone to benefit from the clunker bonus from the government. This stipulation rewards people who have held on to old, cheap gas guzzlers a long time, which serves the opposite ends of the program - which is to encourage new-car sales.

The most destructive provision is that the clunkers subsidy is distributed only when the old cars are destroyed. Clearly, these people are not car lovers because the clunkers of today are tomorrow’s classics. Worse is the principle that a billion dollars or more are being spent to destroy things. That’s a perverse way to go about creating economic growth. Without the clunkers program, all that money would have been spent on something else.

The Obama administration got the cash-for-clunkers costs all wrong. The initial $1 billion for the program lasted just 8 percent of the time it was projected. But no matter, government can always squeeze more out of taxpayers. On Friday, the House added another $2 billion to the clunkers program. Hopefully the Senate will slam on the brakes and refuse to further fund the junking of clunkers.

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