Brookings: 'Cash for Clunkers' was an Edsel
A study by the liberal Brookings Institution reveals that the "Cash for Clunkers" program that gave a big subsidy to car buyers if they traded in their gas guzzler for a newer model accomplished some of its goals but in a ruinously expensive manner.
As a job creator, the Obama administration's Cash for Clunkers program was a sputtering old jalopy that deserves to stay in the scrap yard, according to a study released Wednesday.
The program, which fueled a car-buying spree in the summer of 2009, cost $1.4 million for every job it created and did little to reduce carbon emissions, a Brookings Institution report said. In comparison, research has found one job is created for every additional $95,000 spent on unemployment benefits.
"In the event of a future economic recession, we would not recommend repeating the CARS program," Brookings researchers Ted Gayer and Emily Parker wrote, using the acronym for the Car Allowance Rebate System.
"While the program did accomplish both of its goals of stimulating the automobile market and decreasing carbon emissions, there are more cost-effective policy proposals to achieve these objectives."
The authors of the study are being far too kind. This was a boondoggle. It's like saying the Pentagon buying a $400 hammer is OK because, after all, a hammer is a hammer and it did what it was supposed to.
There is one group that disagrees with the study - the Automobile Dealers Associatioin that the program was fabulous:
But the National Automobile Dealers Association, a major backer of the $3 billion program, argued the study ignored the boost to state and local tax coffers provided by the program and the sales outside of the Clunker program that were generated by interest in the deal.
"There's no question Cash for Clunkers was the best Obama administration program to date," association spokesperson Bailey Wood said.
You can hardly blame them. Suppose you were an auto dealer and the government fairy came down from the sky and dropped $3 billion in your lap? You'd be pretty happy too.
But the Brookings researchers said the program mainly benefited wealthier and more educated Americans and provided less of a fiscal boost than programs that typically target the poor like social security, unemployment benefits and payroll tax cuts, all of which have per-job costs of $200,000 or less. While over 650,000 clunkers were traded in, consumers only bought 380,000 vehicles they wouldn't have otherwise purchased, the researchers conclude.
There are few more inefficient ways to generate economic growth than government spending. We saw it with the $900 billion stimulus bill and now the cash for clunkers program. It's not that these programs don't generate jobs and wealth. They do. The problem is it costs far more per job created than if the money had been returned to taxpayers to spend as they chose. Tens of millions of people making individual decisions on how to spend their own money is more efficient in hte long run than a decisions made by some bureauicrats in Washington.
When will we ever learn.