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Cash for Clunkers

GAO: Economic Recovery Benefits of ‘Cash for Clunkers’ Are ‘Uncertain’

"Cash for clunkers,"
the White House's much-touted program encouraging trade-ins for more
fuel-efficient autos, had an "uncertain" impact on economic recovery,
according to a new audit from the independent Government Accountability
Office (GAO) -- largely because it remains unclear how many of the car
sales it spurred would have occurred without taxpayer subsidies.

clunker.jpegWere "clunker" trade-ins a good thing for the stalled economy? (Photo: NYT)

The GAO report
casts doubt on several of the Obama administration's claims about the
success of the "clunkers" plan, including the extent of its economic
benefits and the emissions savings achieved by replacing older autos
with more gas-sipping vehicles.

While the GAO's nonpartisan auditors concluded that "clunkers"
program achieved its overall goal of promoting economic growth, they
could reach no consensus on how to measure that stimulative effect. A
laudatory "clunkers" report
from the White House Council of Economic Advisers reached similar
conclusions concluded that 64 percent of "clunkers" sales were
"incremental," meaning that the trade-ins would have occurred
regardless of whether government subsidies were on offer.

The
U.S. DOT, using its own surveys, concluded that 88 percent of trade-ins
under the program were effectively pushed forward in time; however, the
GAO questioned the reliability of that data because the department "did
not follow some generally accepted survey design and implementation
practices." (ed. note. Streetsblog Capitol Hill contributor Ryan Avent made similar observations in August.)

Apart
from its effect on vehicle sales, the trade-in program was also
credited by the administration with increasing the U.S. gross domestic
product. But the GAO found that assertion equally difficult to prove,
citing interviews with auto executives who confirmed only that
"clunkers" sales decreased their inventory. "[I]t is not clear how much
of the reduction in inventory led to increased automobile manufacturing
and, therefore, a positive impact on Gross Domestic Product," the
auditors wrote.

The GAO found more holes in the administration's assertions about pollution savings achieved by the $3 billion "clunkers" plan.

The
U.S. DOT concluded that the average beneficiary would consume 10
percent less fuel as a result of trading in their older autos, but that
figure was estimated using the same flawed methodology that resulted in
the 88-percent "incremental sales" figure.

In addition, the
U.S. DOT did not attempt to measure the emissions generated by
scrapping the traded-in "clunkers" and manufacturing the new vehicles
purchased, which "may offset some of the program’s effect on emission
reductions," according to the GAO.

Interestingly, the congressional Democrats who helped pass two rounds
of "clunkers" spending depicted the GAO audit as a vindication of their
efforts. Rep. Betty Sutton (D-OH) issued a statement calling the
program “an overwhelming success," suggesting that the environmental
effects of the auto trade-ins were ancillary:

The["clunkers"] program was about more than just cars. It was aboutpeople. It was about our friends and neighbors who depend onauto-related jobs to support their families. And,it was about our communities that depend on auto-related jobs for theirtax base to support our schools, police, fire and other city services.

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