So yesterday the much discussed Cash For Clunkers ended its $2.877 billion run, moving 690,114 new cars off America's car lots and into the traffic jams. According to the Obama administration, it created or saved 21,000 jobs. So far so pat on the back. Except that each of those cars cost US taxpayers $4168 per car. And for that much money, we could have gotten a lot more. Consider this: C4C only required a fuel economy increase of 2 mpg over the original car, so the total mandated gas savings was about 38 million gallons of gas. The auto companies can raise the fuel economy of cars on the assembly line by that much at a cost of $500 per vehicle. So, we could have given our $2.87 billion to the auto companies to upgrade 5.5 million cars by 2 mpg or more, and bought ourselves a yearly fuel savings of 303 million gallons of gas.
If we wanted to be even trickier, we'd stop giving handouts to the auto dealers and give credit to consumers who are struggling with unemployment, the mortgage crisis, and everything else. If we'd turned the $2.87 billion into loan guarantees we could have offered $57.5 billion in low interest auto loans--enough to finance 3.8 million cars at $15k a pop. Now THAT would have created a LOT of jobs. Better still, the loans would have helped working families save money on car payments (which for people with shaky credit can easily run to 18 % interest) and on gasoline.
Gasoline: Another missed opportunity. If we'd made only cars getting 32 mpg or more eligible for the loans we could have saved 855 million gallons of gasoline a year. Much much more than 38 million.
And if you're not riled up enough:
See UC Davis economist Chris Knittel's excellent work on the implied cost of carbon in Cash For Clunkers.
And here's a consumer-action warning that some dealers may be "double dipping" from both consumers and the program.
(Photo: Flickr User Tony the Misfit)