But Now You Know

Cash for Clunkers Causes Pollution and Poverty

This was going to be an article about how the Obama administration’s “Cash for Clunkers” campaign is an assault on the poor — which it is, because it breaks the flow of newer used cars to poorer people — but, in gathering facts for it, I came to realize that another of the unintended consequences of this self-destructive law is that it, literally, will increase pollution.

Why?

Ultimately, both of these side-effects are caused by the bizarre, authority-obsessed requirement that the cars traded in be destroyed, not sold to owners of even older cars.

Cash for Clunkers Pollutes

This is because the older a car, the worse its gas mileage. Not only in general, but also because cars tend to perform worse as they age.

Cash for Clunkers only rewards people for buying new cars, not for simply buying any car that got better gas mileage, regardless of its age. And it destroys the cars traded in, regardless of their own gas mileage.

This means that only more-prosperous people, who can afford new cars, are able to use the C4C program. They are, therefore, often trading in relatively nice, fuel-efficient cars. Often, they are even buying cars only a couple of miles per gallon more efficient.

Meanwhile, what about the people with older cars, which are much less fuel efficient?

Simple: They are having the nicer, more efficient used cars they WOULD have bought destroyed. Leaving them in a pollutive car longer than if the C4C never happened in the first place.

Since the older the car, the more pollutive, this has the net effect of WORSE pollution, not better.

Someone buys a new car that gets two miles per gallon better. His used car is destroyed, instead of going to someone who owns an older car that gets TEN miles per gallon worse. The net result is an LOSS of 8 MPG.

Take this real-life example:

• Dude A has a 16 MPG truck
• Trades it in for an 18 MPG truck, Obama gives him $3500 to save 2 MPG
• Dude B has a Chevrolet 1500, that gets 9 MPG
• Dude B finds he cannot afford to buy to buy a 16 MPG truck, because prices have gone up so much.
• He keeps his old truck.

Net result? The Obama plan gets credit for a whole 2 MPG increase, but actually produced a 7 MPG decrease.

“But this isn’t a good example”, some greenie shouts, “people were trading in SUVs for compact cars!”

While that would be a good example of the program increasing traffic deaths, it’s not actually true in this case.

This is because the initial stats claiming it were a contextual lie.

The actual numbers, in fact, show that the most people traded their vehicles in for SUVs and trucks.

But that’s not all…there is a large “carbon footprint” around manufacturing a new car. Statistically, it should be impossible for the above +2 MPG truck to save enough, in pollution, to make up for being built, over keeping the used truck. Same with non-carbon pollution, manufacturing versus microscopically worse gas mileage. Keeping an older car can actually reduce pollution.

Of course that wasn’t the original point of this article:

…and Causes Poverty

In their attack on consumer choice, the Obama administration attacked consumerism itself, which is a very politically-correct thing to do. But the fact is that consumerism makes our economy more efficient, and benefits the poor.

As the best-off consumers buy better things, items out of favor — whether used or just old models — become less expensive, allowing poorer people to buy progressively better stuff for the same prices.

In the case of cash for clunkers, the Obama administration broke this:

• Nice used cars will now be in shorter supply, which will raise the relative prices of the remaining nice used cars.
• This will make it harder for poorer people to afford to upgrade.
• This will trickle all the way down to the very poorest, who will soon find that their ability to buy some minimal car AT ALL, is affected.
• That can mean the difference between getting to a job, and getting out of poverty, or being trapped indefinitely.

So aside from the many other unintended consequences of this program, and there are many, the program has actually set the scene for poor people to have an even harder time affording cars, a vital tool for earning more money.

What’s more, most of the sales are ones that would have happened, anyway.

Didn’t Even Help

Speaking of poverty, the program did not actually stimulate car buying, to help the economy, especially did not help the American car companies (who did not deserve it, anyway), and did not even get those new buyers to save gas mileage!

Why?

Because most of the buying was just what economists call “front loading”; the choice to buy a car was simply moved ahead…once the plan ends, car purchasing will decline to an abnormal low from where it would have been, as most people who could have anticipated buying a car in the next year or two will have simply bought ahead, at taxpayer expense.

The net result, therefore, will be the same amount of economic activity, but crammed hastily into a shorter period of time, and with the economy-damaging side-effect of government spending having required government debt or taxpayer burden.

“Hasty” seems to be a government motto, of late.

Oh, and the “helping American car companies”? The people who took advantage of Cash for Clunkers mostly bought Japanese cars.

In all, these factors mean that even this most feel-good of big government programs, Cash for Clunkers, has had the overall effect of increasing pollution and harming the poor, by removing perfectly good, modern used cars from the road, trapping poorer people in much older cars, for longer…while either increasing pollution through manufacturing more new cars, or just causing future economic turmoil by using economy-depressing public finance to encourage people to simply buy their cars a few months early, all at one time.

August 14, 2009 Posted by kazvorpal | Economy, environment, Politics, Society | c4c, cash for clunkers, economics, Economy, environment, ford, fuel economy, green, mpg, new cars, obama, poverty, used cars | 22 Comments