Congress has yet another half-formed, or half-baked, idea:
Under legislation introduced Wednesday in the House and Senate and called the “Cash for Clunkers” program, drivers could get vouchers of up to $4,500 when they turn in their old fuel-inefficient vehicles for scrapping and buy vehicles that get good gas mileage.
The bill, said Sen. Dianne Feinstein, D-Calif., “would be an important part of helping getting America’s struggling automobile industry back on its feet.”
Taking gas guzzlers off the road, added Sen. Susan Collins, R-Maine, a co-sponsor, “would stimulate the economy.”
Why this won’t work:
Drivers would be eligible for reimbursement for purchase of a new or used vehicle with a fuel economy rating that exceeds federal targets for that class of vehicle by at least 25 percent. The vehicle must have a manufacturer suggested retail price of less than $45,000 and be a 2004 model or later.
Someone who’s driving some old Hunk O’ Junk is highly unlikely to be able to snag a new fuel-sipping vehicle at all, even with $4500 in hand: even the lowliest Chevy Aveo starts on the far side of $10k. And if he buys used, the auto industry benefits not a whit.
Besides, the people who will need this the most will inevitably get the least:
In the first year of the program, a person trading in a vehicle that is model year 2002 and later would be eligible to receive $4,500 for purchase of a new vehicle, $3,000 for purchase of a used vehicle or $3,000 for transit fare credit. For model year vehicles 1999 to 2001, drivers would get $3,000 for the purchase of a new vehicle. Those who trade in vehicles that came out in 1998 or before could get a credit of $2,000 for a new vehicle.
The Federal Government of Germany has decided to offer something never seen before in the country: €2,500 cash when you purchase a new car, as long as you also get rid of a car which is at least nine years old and has held a German registration plate for at least six months. The measure is designed to help Germans to get rid of old cars, since 3.8 million vehicles that are between 16 and 25 years old are still being driven.
This plan has the benefit of simplicity, at least. Congress could never come up with something like that: they’re too emotionally wedded to the concept of Questionable Optimization, as any perfunctory glance at the tax code will instantly confirm.