Cash for Clunkers: The successful failure

Environmentalists don't like it, and neither does the right. But it's still working just fine

By Andrew Leonard
Published July 31, 2009 11:34PM (UTC)
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In this July 27, 2009 photo, a woman shops for a car at Springfield Auto Mart in Springfield, Vt., a dealer for Buick, Pontiac and GMC. Above her is a car that was dumped in a dumpster as a visual promotion for the government cash-for-clunkers program. The government's popular "cash for clunkers" program is running out of money as car shoppers flock to dealerships to take advantage of the rebates. The White House says it is assessing its options amid concerns the program's $1 billion budget may have been depleted.

So Cash for Clunkers, the scheme by which the Obama administration hoped to both stimulate auto sales and get fuel-inefficient vehicles off the road, has turned out to be hugely popular, burning through its initial funding of one billion in just a week. On Friday morning the House of Representatives hurriedly authorized another two billion, grabbed from stimulus funds earmarked for the Energy Department. The Senate will decide on the additional funds next week.

It's a fascinating little story, because both the left and the right are claiming the program to be a failure, while at the same time, on at least one metric, it is an obvious success. As a flat out stimulus measure aimed directly at one of the U.S.'s most ailing industries, Cash for Clunkers might end up being the most effective government intervention masterminded by the Obama administration so far. Auto sales in July are almost guaranteed to hit a high for all of 2009.


President Obama took immediate credit on Friday:

Not more than a few weeks ago, there were skeptics who weren't sure that this "Cash for Clunkers" program would work. But I'm happy to report that it has succeeded well beyond our expectations and all expectations, and we're already seeing a dramatic increase in showroom traffic at local car dealers.

Republicans, unsurprisingly, are upset. Arizona representative Jeff Flake complained that the government is picking "winners." Well, sorry Jeff, but your party lost the election, Michigan has 15.2 percent unemployment and the U.S. government has invested billions in Chrysler and GM. If you are striving, a la Keynes, to juice demand by getting consumers to open up their wallets, why not encourage them to spend on products that will help out the nation's most depressed region, thus dovetailing with other government support of the auto industry? That just seems smart.

Environmentalists are unhappy, however, because the original guidelines for the program were so watered down that it's all too possible to buy a new car that has only marginal fuel economy improvements over the old clunker. People are buying new Ford trucks to replace their old ones, instead of Priuses in exchange for Hummers. Or so we hear from anecdotal reports -- we don't have good data yet on the breakdown of the new purchases, which has led to some Senators declaring that they won't vote to authorize funding unless the environmental rules are tightened, or there is evidence that the program is working as planned.


As Senator Claire McCaskill, D-Mo. tweeted this morning:

Want to study & read what House passed yesterday.We'll not consider in Senate till next week.Also want details of how program is working.C4C

The most hilarious aspect of this are right-wing attempts to depict Cash for Clunkers as an unmitigated failure that should be a case lesson in why we don't want the government running health care. Instapundit is exhibit A: Glenn Reynolds cherrypicks a few paragraphs detailing some technical problems implementing the program from a Minneapolis-St. Paul StarTribune article that mostly documents how popular Cash for Clunkers is, in the service of a clumsy partisan attack.

"Producers can't catch a break under this Administration," concludes Reynolds, in a mind-boggling display of blind obstinacy. The problems "producers" -- in this case, car dealerships -- are having are a direct result of the success of the program. There's so much demand, that government is having a hard time processing reimburses of the $4500 credit that goes towards the purchase of a new car. The "producers" are also worried that because demand has already sucked down the initial $1 billion of funding provided, they might be left holding the bag for cars that consumers have already bought, if the program closes down abruptly.


Congress is not going to let that happen. Even if Cash for Clunkers is providing only marginal environmental benefits, it is clearly exerting a stimulative effect on the economy, automakers, and, eventually, recession-hammered Midwestern states. That's a winning trifecta for the Obama administration. I would be shocked if the Senate doesn't fall into line with the House.

UPDATE: FreeExchange begs to differ, calling Cash for Clunkers a waste and a "policy blunder."

Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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