Cash for Clunkers Was a Bad Idea (Part #437)

A new study finds that paying people to destroy functioning cars and replace them with new, marginally cleaner cars was a bad idea. Again:

A newly updated analysis from economists at Resources for the Future finds that the actual benefits of the program were pretty meager. The paper examined U.S. car sales using trends in Canada as a control group, and estimated that about 45 percent of cash-for-clunker vouchers went to consumers who would have bought new cars anyway. In the end, the program boosted U.S. vehicle sales by just 360,000 in July and August of 2009 and provided no stimulus thereafter. What's more, the program increased average fuel economy in the United States by just 0.65 miles per gallon.

Now, there's a case to be made that that's better than nothing. For one, handing $3,500 vouchers to people who would've bought cars anyway still counts as stimulus. What's more, as the RFF paper found, the program reduced overall U.S. carbon-dioxide emissions by between 9 million and 28.4 million tons. But even so, that implies that it cost between $91 and $288 per ton to get those reductions — a pretty lousy bargain as far as carbon policy goes. Even if the program did have some benefits, it's hard to argue that it was an efficient way to dole out cash.

For what it's worth, figures for the appropriate cost of carbon dioxide tend to hover between $20 and $40.

Reason was all over the Cash for Clunkers fiasco.

Take it away, Uncle Sugar: