Saturday, January 5, 2013

A Cash for Clunkers update


Back in 2009, the Cash for Clunkers program was envisioned as a $3 billion tax-payer funded boost to the economy by offering a $4,500 rebate on used cars to be applied towards a new one. The thought was that this stimulus program would aid a flagging auto industry, bump economic activity and get older less-fuel efficient cars off the street and thus, out of the environment.

Turns out none of this happened as hoped for. As we’ve chronicled in previous posts, Cash for Clunkers has resulted in Clunker’s remorse for people who jumped on the $4,500 rebate and found themselves in a 5-year new car lease that, as it turns out, they could not afford (and the housing/financial crisis was all Wall St.’s fault?) and for a car that a year later they no longer wanted.

Cash for Clunkers also shafted lower/working class families out of perfectly serviceable used cars that they could have employed to get to and from work, school, the market, the doctor, etc. By taking 690,000 used cars out of circulation, it bumped up the price of used cars further putting those cars out of the reach of affordability for those who needed it the most. With transportation mobility comes upward economic mobility and Cash for Clunkers did its part in snuffing out that dream for many lower-income American families.

Cash for Clunkers also shafted charities out of used cars that would’ve been otherwise turned over to them for refurbishment and then turned back over to that charity’s targeted need.

And, as studies have shown, Cash for Clunkers was merely “sugar” as it did temporarily spike auto sales but all it was doing was stealing demand from later on down the road. Overall, net car sales remained flat.

Now, as it turns out, Cash for Clunkers, on top of everything else was/is, horrible for the environment as well.

According to E Magazine, the “Clunkers” program, which is officially known as the Car Allowance Rebates System (CARS), produced tons of unnecessary waste while doing little to curb greenhouse gas emissions.

The program's first mistake seems to have been its focus on car shredding, instead of car recycling. With 690,000 vehicles traded in, that's a pretty big mistake.
According to the Automotive Recyclers Association (ARA), automobiles are almost completely recyclable, down to their engine oil and brake fluid. But many of the “Cash for Clunkers” cars were never sent to recycling facilities. The agency reports that the cars’ engines were instead destroyed by federal mandate, in order to prevent dealers from illicitly reselling the vehicles later.

The remaining parts of each car could then be put up for auction, but program guidelines also required that after 180 days, no matter how much of the car was left, the parts woud be sent to a junkyard and shredded.

Shredding vehicles results in its own environmental nightmare. For each ton of metal produced by a shredding facility, roughly 500 pounds of “shredding residue” is also produced, which includes polyurethane foams, metal oxides, glass and dirt. All totaled, about 4.5 million tons of that residue is already produced on average every year. Where does it go? Right into a landfill.

E Magazine states recycling just the plastic and metal alone from the CARS scraps would have saved 24 million barrels of oil. While some of the “Clunkers” were truly old, many of the almost 700,000 cars were still in perfectly good condition. In fact, many that qualified for the program were relatively “young,” with fuel efficiencies that rivaled newer cars.

And though the point was to get less fuel efficient cars off the roads, with only 690,000 traded in, and over 250 million registered in the U.S., the difference in pollutant levels seems pretty negligible.

But all that vehicular destruction did more than create unnecessary waste for the environment. It also had some far-reaching economic effects.

Fully 60% of a car’s recyclable value is in its engine and drivetrain but by federal mandate, the car’s engine was to be filled with a sodium silicate solution and left to rust away in perpetuity in a landfill near you.

Because it was a brief program and because it had a limited scope, Cash for Clunkers, of all the Keynesian gimmickry employed by the federal government, provides perhaps the clearest and best example of the negative consequences that result from the government injecting itself into the marketplace.

Cash for Clunkers: no net positive effect on auto sales, a bain to this country’s charities, sticking it to lower-income families and, now, horrible for the environment. What’s not to love about all that?



K T Cat said...

How marvelous that we were able to get ignorant environmentalists to push a graft scheme for the UAW.

Dean said...

That's pretty much the extent of it, isn't it?

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