Cultural Revolutions

Cash For Clunkers

When Alan Blinder first proposed the Car Allowance Rebate System (CARS), commonly referred to as the Cash for Clunkers program, in a July 2008 New York Times op-ed, he foresaw benefits to the economy and the environment, and a “more equal income distribution.”  The program has fallen rather short of its intended mark.

Most of the media have been calling Cash for Clunkers a huge success because of overwhelming participation, which resulted in about 700,000 trades.  But, a leading automobile-consumer resource, issued a press release in October claiming that “Cash for Clunkers cost taxpayers $24,000 per vehicle sold.”  Analysts looked at the number of luxury vehicles and others not included in the program and used the historical relationship between those numbers and the seasonally adjusted annual rate of cars sold to determine how many cars would have been sold, were it not for Cash for Clunkers.  The analysis determined that of the nearly 700,000 purchases, only 125,000 would not have happened anyway.  The others were already planned—buyers who had heard the program was coming and waited to purchase a vehicle, or those who perhaps would otherwise have held on to their “junkers” a little longer.  The White House returned fire, suggesting that this was equivalent to saying that “all the other cars were being sold on Mars, while the rest of the country was caught...

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