The $3 billion lemon
The health care debacle forces nearly everyone to face the reality that President Obama’s schemes usually crash and burn and leave only a cloud of smoke and dirt to pollute the economic environment. The Brookings Institution now confirms what many realized early on, that the administration’s $2.9 billion “Cash for Clunkers” stimulus program in the summer of 2009 was the ultimate clunker.
The two-month program was the brainchild of economist Alan Blinder, whose July 2008 op-ed essay in The New York Times suggested the government paying to take old cars off the road would stimulate the economy, help the environment and reduce economic inequality. The Democratic Congress gave great weight to the opinion of Mr. Blinder, who was an economic adviser to the presidential campaigns of Al Gore and John Kerry. Congress had just enacted Mr. Obama’s $787 billion economic-stimulus bill a few months earlier, so what could it hurt to blow a few more billion more?
Brookings researchers Ted Gayer and Emily Parker have now absorbed all the available government data, and they conclude that Cash for Clunkers was at best a disappointment. The program offered would-be car buyers vouchers of $3,500 to $4,500 if they traded an old gas-guzzling Belchfire 8 or a Clatterbang 6 for a new model promising better gas mileage. This would send customers flocking to showrooms with fistfuls of cash, ready to buy.
The Brookings report concedes that this might have “provided a boost” in sales of 380,000 cars, but “most of these sales would have otherwise occurred during subsequent months.” The clunker people were planning to buy a new car, anyway. The government just created an incentive to accelerate decisions to buy, and there was little if any net increase in auto sales. As soon as the subsidy ended, the sales boom ended.
Cash for Clunkers did as little to provide relief to the unemployed as the president’s broader stimulus bill. According to Brookings, the clunker scheme “was actually more expensive per job created than alternative fiscal stimulus programs.” It spent $1.4 million for every job it claimed to create.
The gasoline mileage incentive was meant to help end America’s dependence on the Middle Eastern oil cartel, but the savings in fact were but a drop in an oil drum, the equivalent of 2.4 to 7.9 days’ consumption of gasoline. This didn’t appreciably reduce carbon dioxide, no polar bears were saved and the hyperventilating environmentalists probably produced more air pollution than the rest of us saved.
Cash for Clunkers was an ecological disaster, too. Automobiles with a useful life remaining were subjected to a lethal injection of sodium silicate, a substance designed to cause an engine to self-destruct. Landfills unnecessarily expanded, and scarce resources were expended to make new cars before they would have been needed.
The sudden demise of so many automobiles reduced the supply of used cars, sending prices skyward, punishing the poor and thrifty most of all. Obamacare, the costly and celebrated stimulus and Cash for Clunkers (Mr. Obama, like Kilroy, leaves his signature everywhere) all fail for the same reason. These programs put their faith in government, not the free market. The wreck is unavoidable.