Wonk Room » Building A Better Cash For Clunkers Plan (Update: Auto Lobby Responds)

Building A Better Cash For Clunkers Plan (Update: Auto Lobby Responds)

By Pat Garofalo on Jun 9th, 2009 at 1:50 pm

Building A Better Cash For Clunkers Plan (Update: Auto Lobby Responds)

old-car Today, the House plans to vote on a bill crafted by Rep. Betty Sutton (D-OH) — and supported by Sen. Debbie Stabenow (D-MI) — that would initiate a “cash for clunkers” plan. Under the plan, “consumers could receive rebates of up to $4,500 for turning in their gas-guzzling cars and trucks for more fuel-efficient vehicles.”

Sen. Dianne Feinstein (D-CA) has put together her own version of cash for clunkers, and of the two, Feinstein’s is far stronger. Thus, Elana Schor at Streetsblog expresses proper concern that “if Sutton’s plan wins House approval this week, Stabenow’s Senate counterpart could potentially get a leg up over Feinstein’s”:

Feinstein’s proposal would require drivers to achieve a 25 percent fuel-efficiency increase before receiving a tax credit for ditching their clunkers. But Michigan Sen. Debbie Stabenow (D) is pushing for a trade-in tax credit that’s very similar to Sutton’s — truck owners would only have to increase their fuel efficiency by 2 miles per gallon to be eligible. The requirements for car trade-ins aren’t much better under the Stabenow and Sutton plans, with a mere 4 mpg increase in fuel economy triggering the $3,500 tax credit.

In light of the new CAFE standards announced by President Obama — which stipulate that cars and light trucks will have an average mile requirement of 35.5 miles per gallon by 2016 — why would we want to incentivize the extremely modest fuel efficiency improvements in Sutton’s bill? For instance, a “2009 Hummer H3T, which gets 14 mpg in city driving and 18 mpg on the highway, could qualify for the incentives” under Sutton’s plan. That’s not really doing anyone a favor, except for the firm that built the Hummer.

Ultimately, cash for clunkers is not the most effective way to upgrade to a more fuel efficient fleet. The vouchers for new vehicles seem to apply only to upgrades within the same type of vehicle (so truck owners get new trucks, car owners get new cars, etc.) which doesn’t encourage a transition away from trucks, even though a truck with good fuel efficiency is way less efficient than a fuel efficient car. The program is essentially economic stimulus for the auto industry, and could turn into a huge handout if the standards aren’t high.

That said, a properly designed program could have some valuable effects in terms of stimulus and combating traditional pollution. And if that is indeed the goal, Sutton’s bill doesn’t seem like the best way to get the ball rolling.

Update Charley Territo from the Auto Alliance writes in to take issue with our post, arguing, "The best thing we can do for the environment is purchase a new car." He said the Sutton/Stabenow bill “has the best opportunity of becoming law,” and that passage is needed right now because “there is mounting evidence that consumers are actually holding off on new vehicle purchases pending the passage of this legislation.” Territo adds that the Sutton/Stabenow bill is intended to be a short-term solution to spur vehicle sales. “This legislation is meant to help dealers sell the model year 09/10 vehicles currently on dealer lots," he told The Wonk Room.

Comments
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One Response to “Building A Better Cash For Clunkers Plan (Update: Auto Lobby Responds)”

A Siegel Says:

???/

“The best thing we can do for the environment is purchase a new car.”

* How about figuring out how to reduce demand?
* How about energy efficiency throughout our lives?

If Territo wants to argue that one (one) of the value streams from a Cash for Clunkers is improved environment (reduced environmental impact), there is a case to be made. But don’t blow smoke up our —–s by asserting that it is the “best thing we can do for the environment.”
June 9th, 2009 at 5:59 pm