Ad Nauseam: What “Cash for Clunkers” Hath Wrought

The government’s Cash for Clunkers program officially begins today,
but car dealers have been running ads like this one for a while
already. They have to keep the public informed: Now you can trade in
your old car and buy a brand-new SUV or pick-up truck with a hefty
assist from Uncle Sam.

Here we have the government spending
a billion dollars on about 250,000 vouchers for individual car buyers.
Ostensibly, the purpose is to save some jobs and cut some emissions.
Meanwhile, we’re in the middle of a budget crisis affecting transit agencies serving 22 million Americans. Green jobs
and emissions-reducing transportation are on the line. When DOT
Secretary LaHood holds his press event on Monday touting the roll-out
of Cash for Clunkers, someone should ask him how the Obama
administration can justify this dubious car industry subsidy while
hanging transit riders out to dry.

  • DJB

    I think a strong version of “cash for clunkers” would make sense (from the perspective of reducing GHG emissions) IF it were paid for by a new carbon tax on gasoline (which would reduce VMT) which also supported investments in transit, transit supporting land use patterns, and bike infrastructure.

    By “strong” I mean no subsidies for cars that get under, say, 35 MPG (city/hwy average), and no subsidies for light trucks and SUVs. It doesn’t make sense to reward an H2 driver for going from 10 to 15 MPG, even though that’s a 50% improvement . . .

  • David Galvan

    This program is a good thing. If someone has an old car with poor mileage, this program should help motivate them to purchase a more fuel efficient car. Makes sense to me.

    I remember a similar program about 10 years ago that would pay you $1000 to take your car to a junk yard if it didn’t pass smog check. It was a way to encourage people to get their pollution-heavy cars off the road.

    The changing of our society to one that more favors public transit options is going to be gradual and region-specific. Semi-rural areas will likely never see major public transit initiatives that will make sense for them. But automobiles are used throughout the nation. Hence, this (federal) program makes sense. I don’t see a problem with it.

    DJB, yes it does make sense to encourage people to upgrade their mpg ratings, ESPECIALLY if it’s from 10 to 15 mpg. Obviously, that’s not as good as going from 10 to 35 mpg, but going from 10 to 15 saves a lot more fuel than going from 25 to 35.

    Your comment illustrates a very common misconception about gas and emissions savings. People don’t think about the fact that, when we talk about miles per gallon, there’s an inverse relationship involved.

    Let’s do an example:

    It’s easier to think of this in terms of gallons per mile instead of miles per gallon. A 10 MPG car uses 0.1 gallons of gas for every mile driven, and a 15 MPG car uses 0.067 gallons per mile. So upgrading from 10 to 15 provides a savings of (0.1 – 0.067=) 0.033 gallons for every mile driven.

    Now think of someone upgrading from 25 MPG to 35 MPG. That’s going from 0.04 gallons per mile to 0.03 gallons per mile. So that upgrade only saves 0.01 gallons of gas for every mile driven. The truck/hummer upgrade saves over 3 times more gas than does the sedan upgrade.

    Getting people to trade in their old trucks and SUV’s to get new trucks and SUV’s will save much more gas and lead to far greater emissions savings than getting people to trade in their older sedans for newer sedans. (I’m assuming most people are not going to change TYPES of vehicles; ie: most people won’t trade in their hummer and purchase a SmartCar or a Prius.)

    Even going from a 25 mpg sedan to a 50 mpg Prius saves less gas per mile than going from a 10 mpg truck to a 15 mpg truck. (1/25 gallons per mile minus 1/50 gallons per mile = 0.02 gallons per mile savings; compare with the 0.033 gallons per mile savings for the truck upgrade.)

  • DJB

    David,

    It was not my intent to suggest that a, say, 10 MPG increase in fuel economy saves the same amount of gasoline when you start at, say, 10 MPG, versus starting at, say, 30 MPG.

    From a normative point of view, I don’t think government subsidies should go to passenger cars/trucks/SUVs with low fuel economy (transit buses and industrial vehicles are a different matter), even if those vehicles are more efficient than the ones they replace.

    My solution for the Hummer driver is to steadily increase the pain he/she feels at the pump through taxation, and channel that money into transportation that can actually solve our environmental problems, instead of merely making them worse more slowly, which, in the end, doesn’t matter much.

    Along those lines, the subsidies ideally wouldn’t even go to gasoline cars at all, they would only (to the extent they go to vehicles) to vehicles that can be powered by clean-renewable electricity (e.g. plug-in hybrids and electrics).

    We can’t forget that what we subsidize and prohibit as a society sends a message. If we subsidize inefficient vehicles to meet an economist’s definition of rationality, we inadvertently, in my view, send the message that it is somehow commendable to drive an SUV that gets, for example, 15 MPG.

  • David Galvan

    What if the SUV driver uses it to transport his family of 5 on camping trips and vacation, and for little else? What if the SUV or truck driver needs to use such a vehicle for their work, or in order to negotiate the terrain around their rural home? Should they not be encouraged to get a version of their vehicle that uses less gasoline? That is what this program is for, and I think it is commendable for that.

    You seem to be assuming that people drive SUV’s just to be obnoxious. While they don’t make all that much sense for city driving, they do have their uses. And not every American lives in a region where a small car or a prius will meet their needs (or budget, given a new prius is around $30k).

    Your solution of increasing gas taxes (I assume you mean increasing the gas tax and not levying some sort of special SUV tax) and putting the money into transit funding is not a bad one, and this cash for clunkers program does not preclude such a plan from happening in parallel. But I think it would make more sense to do that at the state or county level than at the federal level. Sure, in L.A. such revenue will go toward improving our bus and rail systems, giving us more options to get from point a to point b. But what would it do for people who live in Wyoming or in far flung parts of Texas? All it would do for them is make it more expensive for them to get around, and they would see no benefits in return, as public transit will likely never be a reasonable option for those areas. They more or less HAVE TO use their cars, and so the best solution for them is to get more fuel efficient versions of the type of vehicle that suits their needs.

    Every region in this nation uses cars, which is why the cash for clunkers program discussed here is an appropriate federal program. It will go a long way toward reducing our gasoline usage and emissions production on a national level.

    If I were Ray LaHood, THAT’S how I would justify this program.

  • DJB

    People who use trucks for work: the carbon tax encourages truck/SUV drivers to get versions of their vehicles that use less gasoline. It encourages auto-makers to focus on fuel economy and on trucks that don’t use gasoline: a critical component in stopping climate change. If a truck can run on solar-generated electricity via a plug-in hybrid system or something, I say start subsidizing that too.

    Carpooling in an SUV: I think this point is good. It’s true that an H2 gets 10 MPG, but with 5 people inside it gets 50 passenger miles per gallon, the same as a solo driver in a Prius (which by the way starts at $23,000, not $30,000) http://www.toyota.com/sem/prius.html?srchid=K610_p2665505

    Rural homes: I do sometimes have some sympathy for people in rural areas, but not everyone who lives in a rural area needs to live in a rural area, or in a particular part of a rural area. Unless you’re practicing agriculture or something, which very few people in America do anymore, being in a rural area is often a matter of choice, not of necessity. Hence, the tax encourages people to move closer to their jobs. A much more common phenomenon than people who actually work in a rural area is exurbia: gigantic faux-rural commuter estates that are catastrophic for the environment.

    Last time I drove on a dirt road I was doing it in a Ford Escort. A 4×4 is almost never really necessary. If you do subsidize SUVs, subsidize ones like the Escape, which gets about 30MPG in its four-wheel-drive version.

    Transit in rural areas: true, it won’t work well, there isn’t enough density, but that doesn’t mean all efficient cars are incapable of handling rural roads.

    Sorry to rant so much, I’ve enjoyed our spat :)

  • angle

    All this nonsense about fuel economy and the environment is a red herring. What this “Cash For Clunkers” program is really about is an attempt to prop up the decaying consumer economy.

  • limit

    Stimulate the economy and get more effective vehicles in use. The might be a monetary multiplier effect and a reduction in emissions. I am definitely not against this experimentation.

  • Of course, you stimulate the economy for the short period that Cash for Clunkers is in operations. After you’ve shot that wad, now what? It’s going to be the same with the first time home buyer’s credit: a temporary stimulation in demand, followed by a drop in prices.

  • angle

    Keep in mind that when people get more efficient, high-milage cars, they tend to drive them more, which begins to cancel out both environmental benefits and fuel savings.

    Why not invest a billion dollars into retooling the car companies for constructing public transportation systems? At least there would be a chance that workers involved in that industry would have jobs beyond the next few fiscal quarters. Indeed, any number of projects that contribute to LESS car use would a worthwhile investment.

    Instead, all of the public’s money is being squandered on life support for a credit-based “culture of stuff” that requires a steadily growing economy for its viability. This program is going to encourage people with shrinking incomes to further over-extend themselves with new car loans, and if a certain amount of them end up defaulting, we end up with another catastrophic financial shock.

  • Nancy

    “Here we have the government spending a billion dollars on about 250,000 vouchers for individual car buyers…”

    We are spending a billion dollars. We. *sigh*

    I have a friend who works for a sort of dealership consortium in NY, and he says the bill was written by the auto industry lobbyists, and slightly modified by Congress.

    So did we really think this is about the environment?

  • Wad

    Angle wrote:

    Why not invest a billion dollars into retooling the car companies for constructing public transportation systems?

    Because we could get better products at a cheaper price if we just imported them from Europe (trains) or Canada (buses).

    And most times when the government decides to create a domestic public transit market, the end products are craptacular.

    AM General, which builds the Humvee for the military, had the distinction of producing arguably the worst buses to ever run on American roads. Boeing, a maker of fine planes, couldn’t parlay their aviation know-how into building a light rail vehicle that did anything other than give San Francisco Muni and Boston MBTA mechanics overtime by the bushelful.

  • angle

    @Wad:

    You make an interesting point, but isn’t a big part of the problem that we need to keep American workers employed? If I read your post correctly, you’re saying that American companies can build decent quality planes and Hummers, but not rail cars and busses. It doesn’t seem like an insurmountable problem to improve the quality standards for domestically-produced public transit vehicles – I’d say it’s more a question of will. I mean, these companies are already building VEHICLES, it’s not as if we’re asking a computer company to start making furniture.

    I would argue, on a more theoretical level, that just because importing all manner of products is the cheapest way to get stuff in the short-term, it’s not a good long-term policy. At some point in time, it’s going to be a lot more expensive to transport goods all over the world, and if we let our domestic facilities and skills atrophy, we won’t be able to produce even our bare necessities locally.

  • Spokker

    Invest in other countries so that their standards of living go up, sending wages up, so that it isn’t beneficial to import from those countries anymore.

    I mean, look at Japan, who once was an exporting powerhouse. They’ve lost ground to Korea, who has lost ground to countries like Malaysia, Thailand and China. The same way American companies sent their production overseas, Japanese companies have done the same.

    However, the global process of trade is not as simple as exporting a rail car from some Asian country. Parts come from a multitude of countries. Final assembly can occur in the US or some other country. Financial services can come from places like Hong Kong, serving as a middleman between China and the U.S., to give one example.

    And remember that it was an American organization, in this case the transit agency, that sparked the whole global process. This organization has American workers working American jobs that cannot be outsourced. Blue collar jobs are created by the fact that you have to drive and maintain these vehicles. White collar jobs come from the accountants and manager types that oversee the agency’s operations.

    It doesn’t make sense to me to isolate the US from these processes, but to embrace them. After all, if the transit agency can get a better deal on high quality rail cars, that’s more money that can go for services that low-income and disabled people depend on.

    But at the end of the day there will be winners and losers and there’s really no avoiding that.

  • Spokker

    And angle, check this out: http://www.latimes.com/business/la-fi-solar-ship2-2009jul02,1,1259035.story

    It’s not much, but hey, it’s a start.

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  • I got an email this weekend from a car-donation charity that sent along some information about how The “Cash for Clunkers” program effects them and the industry. Interesting read

    http://www.donatecarusa.com/cashforclunkers

  • David Galvan

    angle said:
    “Keep in mind that when people get more efficient, high-milage cars, they tend to drive them more, which begins to cancel out both environmental benefits and fuel savings.”

    That statistic is an average over a large population of drivers. If you look at the details of the study, it looked at a sample population of drivers including those who use their cars to commute over 15 miles a day (round trip), and those who use their cars mainly for casual non-long-commute needs. The commuters drove the same amount regardless of the mpg rating of their car. The casual users drove UP TO (not on average) 25% more than non-hybrid owning casual drivers.

    Summary of study by Quality Planning group:
    http://tinyurl.com/m2xump

    So let’s say you upgrade from a 25 mpg car to a 50 mpg prius. If you drove the same amount, you’d be using half as much gas. Even if you drove 25% more (the up-to, or maximum amount suggested by study), you’d still be using only 75% as much gas as you would be using in the “clunker”. The savings would be even more significant if you upgraded from a car that gets even less miles per gallon.

    And keep in mind, that study did show that for those people commuting over 15 miles roundtrip per day, the amount of miles driven in a hybrid vs. non-hybrid was essentially the same.

    Also, other studies suggest that the average amount of increased driving someone would do from doubling their fuel economy would be (on average) 7%.
    http://features.csmonitor.com/environment/2009/05/22/does-increasing-fuel-efficiency-make-people-drive-more/

    Hence, even if the average of the population did increase their miles driven by the “up-to” amount of 25%, there would still be a gasoline usage savings (the environmental and monetary benefits of driving a hybrid). The cash-for-clunkers program will encourage this type of upgrade.

    I am flabbergasted that so many of you have talked yourselves into thinking that a program that promotes using less energy for the same transportation distance is a bad thing. Yes, it will promote more car sales in our struggling economy as well. That’s not a bad thing either.

  • Wad

    Angle wrote:

    … isn’t a big part of the problem that we need to keep American workers employed?

    It’s a problem that politicians address inappropriately. Plus, current policies have a mechanism for addressing this. It’s called “Buy America”.

    Transit vehicles, particularly, are required to have at least 60% of equipment assembled domestically if federal funds are used to buy them.

    The most dominant bus builders are Canadian and Hungarian. Each of these foreign-owned companies has a U.S. plant where assembly is completed.

    If I read your post correctly, you’re saying that American companies can build decent quality planes and Hummers, but not rail cars and busses.

    Right. America lost its technological edge in the public transit field. Why? Because from the federal government down to localities, the U.S. policy was to empty out cities. This led to a decline in public transit usage, and therefore investment.

    So why did the U.S. focus on planes and war vehicles? It was a gentlemen’s agreement among the World War II powers — both the winners and losers. All powers tacitly agreed to allow the U.S. to develop a civilian defense industry. The U.S. in turn allowed European and Japanese to develop “cottage” heavy industries as a way of restoring their economies.

    U.S. has a heavy stake in the health of the military-industrial complex, and makes the “war business” a protected export industry, as well as a civilian byproduct industry (commercial aviation is made possible by most R&D being conducted by the military, for instance).

    It doesn’t seem like an insurmountable problem to improve the quality standards for domestically-produced public transit vehicles – I’d say it’s more a question of will.

    Will and cultivating markets and putting off any productive activity for at least a whole generation.

    I mean, these companies are already building VEHICLES, it’s not as if we’re asking a computer company to start making furniture.

    Well, if it’s as easy as you make it out to be, Michigan and northern Ohio would be the manufacturing capitals of something else besides cars. Instead, it’s a wasteland of abandoned, useless factories.

    Car companies take a summer recess of a few weeks just to retool their assembly lines when a model is redesigned for the next year. That’s just for the same car.

    A big problem the Upper Midwest finds is that repurposing a former auto factory is prohibitively expensive. It’s not just dismantling and replacing the machinery. It’s also rewiring electricity, adding new climate control systems and making the converted structure space-efficient.

    Wired magazine illustrated this factory problem a couple of months back.

    That’s just dealing with the plant. I’ve mentioned what happens when a company goes out of its core competency and extends its product line. The military-industrial complex built buses and trains with military-industrial complex thinking … not with the peculiarities of public transit in mind.

    The problem is, the vehicles that were a product of the era are long-gone but the thinking still remains. Bus and train makers sell to a monopsony: the Federal Transit Administration. It dictates the specifications of how a vehicle is supposed to be built. Transit agencies have to adhere to these specifications if they want the money to buy the buses or trains. And the bus and train makers have to adhere to the FTA’s specs if they wish to deliver to customers.

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