Claim: Analysis demonstrates the "Cash for Clunkers" program's gasoline savings to be an inefficient economic trade-off.
MOSTLY FALSE
Example: [Collected via e-mail, September 2009]
I guess I must be on the wrong page...
A vehicle at 15 mpg and 12,000 miles per year uses
A vehicle at 25 mpg and 12,000 miles per year uses
So, the average clunker transaction will reduce US gasoline consumption by
They claim 700,000 vehicles — so that's
That equates to a bit over 5 million barrels of oil.
5 million barrels of oil is about ¼ of one day's US consumption.
And, 5 million barrels of oil costs about $350 million dollars at $75/bbl.
So, we all contributed to spending $3 billion to save
How good a deal was that ???
They'll probably do a great job with health care though!!
Origins: In 2009, the federal government's Car Allowance Rebate System (CARS), commonly known as "Cash for Clunkers," provided consumers with $3,500 or $4,500 discounts for trading in older model automobiles and purchasing new, more fuel-efficient vehicles. The analysis presented above maintains that the CARS program essentially spent
The premise that the sole purpose or benefit of the CARS program is to save money on U.S. expenditures is a rather specious one to begin with. And even within that framework,
the analysis is flawed in key aspects.
According to the latest CARS statistics, auto dealers conducted 690,114 transactions through the program, and cars traded in through the program averaged
A vehicle averaging 24.9 MPG driven 12,000 miles per year uses The average CARS transaction will reduce U.S. gasoline consumption by The 690,114 vehicles sold through the CARS program will therefore save a total of
A vehicle averaging 15.8 MPG driven 12,000 miles per year uses
So far, so good — our figures make the CARS program look even less economically efficient than the original analysis does. The fatal flaw comes in the next step, however.
The example presented above claims that
If we take the mid-point of that range (i.e.,
9.8 million * $75 per barrel =
191.5 million gallons of gasoline / 19.5 gallons of gasoline per barrel of oil =
This savings of $735 million per year is over twice the
CARS stats, the total dollar value of transactions conducted under the "Cash for Clunkers" program was about
The original analysis also focuses solely on savings in gasoline costs and doesn't take into account other intended or residual effects of the CARS program, such as the economic benefits of boosting auto sales, reducing pollution by replacing older cars with more fuel-efficient vehicles, increasing safety by replacing older cars with vehicles offering advanced safety features, and providing additional parts and raw materials for the market:
"This is like a second wave of stimulus to our economy," said Bill Goodale, general manager of Millis Industries, which has picked up about 200 clunkers from local dealers and expects to take possession of hundreds more in the next few weeks. "As it trickles down, it helps junkyards. It helps the guy looking for cheap parts to keep his car going. It adds a lot of steel to a market that hasn't produced much of it in the last year."
[The clunkers'] components and frames ... have begun flooding the used parts and scrap-recycling markets with more than 100 million tons of steel, batteries, and tires, among other things.
Last updated: 13 September 2009
Sources: |
Abel, David. "Clunkers' Afterlife." The Boston Globe. 4 September 2009.