Every article says it was bad, but why? And was there any good to it?
In: Economics
Cash for clunkers was probably one of the most successful government programs since the New Deal. They simultaneously took off the road a bunch of unsafe and inefficient cars while boosting the American car industry.
The issue is that, because the government was paying people to junk their car, they couldn’t have people “double dip” and sell privately. The solution for this was to permanently disable the cars by running stuff like sand through the engine. Unfortunately that took a lot of beater classic cars off the road, but these were likely never going to be in great shape again.
People who write articles about cash for clunkers 15 years later care more about the small number of rare cars that got junked than the broader context of the economy and vehicle safety, which makes sense.
It wasn’t. Idiots like to try to point to an event in the past to explain everything bad in the present when they can’t realistically run a simulation without that event, and all they’re doing is blindly assuming that only good would have continued forward. Morons like to believe that every car crushed would’ve still been on the road now 15 years later, when the cars traded in were only good for 7-8 years for the most part and were already nearing their end of life.
Cash for Clunkers incentivized new car purchases, putting more consumer spending into the economy. This kept the economy going. A major recession causing new car production to plummet would not have resulted in more used cars available to purchase right now.
The good was that it got a lot of older, unsafe, and inefficient cars off the road.
The bad was that it absolutely destroyed the used car market. Prices for both used and new cars skyrocketed.
A few reasons. The idea was to spend money to get cars that produce a lot of emissions off the road. people were supposed to take the money and roll it forward to a newer, fuel efficient car.
But the newer cars weren’t that much more efficient with fuel.
And the cars were crushed and destroyed instead of recycled, so it increased demand for material that could’ve been recycled.
Also since those cars were crushed, if you needed a part for your ‘clunker’, it was nearly impossible to find, making repairs more expensive.
Finally, it also killed the shit out of the used car market for a period of time. Idk if it’s still like that. But the program removed tons of vehicles from the road that were perfectly fine just because they were old. For a long time people would be able to buy older used cars because they were more affordable. But after wrecking so many cars it drove the prices of cars up, making them less affordable (which isn’t a good thing if 99.99999% of the country requires you to have a car).
All in all, it was a clusterfuck of bureaucracy
Like so many big government programs, the long-term effects were both beneficial and detrimental, depending on who was affected by them.
On the bad side, it increased the national debt. It unjustly compensated people who drove crappy old cars while offering nothing to people who wisely decided to drive more fuel-efficient cars. By scrapping working cars, it affected both the new and used car markets, which affected car prices for everyone, often to the detriment of average consumers. It compelled some people to participate and to purchase new cars on credit, even when they could not realistically afford those cars. It decreased the ability of certain used-car parts, since those vehicles were destroyed rather than scrapped for parts. And I’m sure there were other negative consequences from the program.
That’s not to say that there weren’t some positive results from the program. It got some gas-guzzling, unsafe vehicles off the road. It decreased fuel needs for the entire nation as a whole. It provided some stimulus to the national economy, such as the obvious benefits to new-car manufacturers. It decreased pollution, which basically affects the health and welfare of the entire nation. Etc., etc.
So, it’s not so much that the program was “good” or “bad.” It affected the nation, both positively and negatively, in complex ways.
The price of gas stayed under $3 for over a year after the program ended. I won’t claim that all (or mostly) due to C4C, but replacing vehicles getting 15 mpg with ones getting 25 mpg did reduce demand for oil.
One part of this program was it took so long for the dealer to get paid that it strained many of those dealers and leased to dealerships failures. .
That it was bad is mostly revisionist history as told by classic car collectors and DIY repair folk.
It’s definitely true that some rare or hard to find cars got caught in the cross fire, but the majority of the cars that got scrapped were things that hadn’t ran in years.
One of the bad aspects of it was that it removed a lot of potentially good used parts. But one of the realities of that is that many of those “clunkers” were never on the market in the first place. They were just scrap sitting in someone’s backyard rotting. I recall some reports of stolen cars being turned in for the program as well.
There were also quite a few scrappers going around and scamming unknowing folk out of their old “clunkers” that weren’t aware of the program. At the time, there were signs all over the place put up by individuals advertising their “clunker removal” service.
One of the positives was that with so many old cars off the road, the used market shot up making them hard to come by and new car prices also shot up.
If you had to buy a car anytime from late 2020 to early 2023, you’d have experienced something similar with used cars being priced at insane levels and new cars going far above sticker price. That’s kind of how it was then. The supply of cars dropped, demand did not.
It was a successful program for the most part. But it is a shame how many potentially salvageable cars met their demise.
If you want to hear all about how terrible it was, you should ask over on a car forum
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