Cash For Clunkers

by Patrick Appel

Robert Frank assesses the program (it gives Americans vouchers for buying more fuel efficient cars). He thinks it makes sense even if you don't consider the environmental angle:

Unemployment and idle capacity in the American auto industry are at their highest levels in decades. As the German experience indicates, auto vouchers are likely to produce an immediate surge in auto sales. This would put people to work who would otherwise be doing nothing. A $4,500 voucher that leads to production of an additional $25,000 car would generate $25,000 of additional income along the value added chain, which in turn would generate more than enough tax revenue to pay for the voucher.