Jack D. Hidary, who describes himself as a “co-architect of the federal Cash for Clunkers,” defends the program on CNN.com, but comes up short of persuasive.
In a nutshell, he says “it stimulates auto sales, increases the efficiency of the U.S. fleet and makes us safer.”
Here are the finer points of his argument:
…One key feature of the Clunkers program is that it is not just $3 billion of new money into the economy. It is injecting $21 billion — since consumers must bring the rest of the money to pay for the new car. That is a lot of stimulus for the dollar.
Isn’t there a chance the money would have found its way into the economy eventually? If not, maybe it just doesn’t belong there. As David Roseberg pointed out, we’ve got too much consumer debt as is. No need to inflate it further.
Cash for Clunkers is saving jobs up and down the auto supply chain: from dealers to assembly workers and parts markers. Dealerships alone lost 50,000 jobs in the last 18 months and would continue to shed jobs without this program.
What happens when cash for clunkers is done and demand returns to where it was? Are we just delaying the job losses? This program is not a permanent solution. The COO of Nissan said as much, telling us that when the programs end, demand falls off a cliff. Then we’re back where we started.
[O]ne of the biggest drags on our economy is our trade imbalance. We import about $700 billion more than we export. That hurts our capital flows, credit and other key indicators.
Guess what amounts to 50 per cent of that trade imbalance? Oil. We use 21 million barrels of oil every day in the United States and import 62 per cent of that — mainly from countries that really don’t like us. We use that oil mainly for transportation — cars, SUVs, and other vehicles.
Unless we scrap guzzlers at a faster rate, we will never reduce our oil consumption. Cash for Clunkers is a step in the right direction. It educates the consumer on how much they are paying for having a low-MPG car and encourages them to get into a more efficient vehicle.
This one isn’t cut and dry, but it doesn’t look good for Hidary. Over the weekend, the New York Times ran the numbers. In their best case scenario, the nation saves 1.6 million barrels per year, or the equivalent of a two-hour supply.
Here is a possible worst case: The clunker was a pickup or S.U.V. driven only a few thousand miles a year because the family had other vehicles. When the cost of fuel went up, the gas-guzzling clunker was relegated to the back of the driveway.
Now the family has traded the clunker for a new fuel-efficient sedan, which will be driven 12,000 miles a year. The miles it displaces are not the ones that would have been traveled in the old S.U.V., but by another sedan that is still on the road. That, in turn, reduces the mileage improvement and gasoline savings achieved.
In multicar households — which is to say, in most American households — the newest car often gets driven the most miles, and the oldest one the least. So, some researchers rightly ask, how fuel-efficient is the car the family still owns but which will now be parked more often?
Here’s Hidary’s last point:
Third, Cash for Clunkers saves lives. When you bring in a clunker that has no airbags, anti-lock brakes or other modern safety features and get a new car that does, you are protecting your family. 40 thousand people die every year on American highways and many more get serious injuries.
We can’t argue with that. However, if that’s the only reason for justifying the program, we’re just not buying it.
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