Report: cash-for-clunkers (CARS) program not terribly efficient

by Brian Wolfman

Remember the Obama Administration's early "stimulus" program known as cash-for-clunkers? The Consumer Assistance to Recycle and Save Act of 2009, or CARS, was meant to encourage people to trade in their gas guzzlers and buy new fuel-efficient cars. You traded in the gas guzzler, and the federal government funded a $3,500 to $4,500 credit toward the new car. And the car dealer was required to scrap the gas guzzler--even if it ran perfectly well--so that it wouldn't continue its gas-guzzling ways. The idea was that the consumer saved money, new car purchases increased, and the environment was benefited. Back when the program got started, we posted frequently (and fairly skeptically) about the program's value. (Go, for instance, here, here, here, here, and here.)

Now, a study by Ted Gayer and Emily Parker at the Brookings Institution has found that

The Car Allowance Rebate System (CARS) or “cash for clunkers” program, launched during the height of the recession with the intention of stimulating the economy, creating jobs, and reducing emissions, was actually far more expensive per job created than alternative fiscal stimulus programs.

For more information, read Almost anything would have been better stimulus than ‘Cash for Clunkers', a review of the Brookings' study by Brad Plumer. The study's specific findings are set out after the jump.

• The $2.85 billion program provided a short-term boost in vehicle sales, but the small increase in employment came at a far higher implied cost per job created ($1.4 million) than other fiscal stimulus programs, such as increasing unemployment aid, reducing employers’ and employees' payroll taxes, or allowing the expensing of investment costs.
• Total emissions reduction was not substantial because only about half a percent of all vehicles in the United States were the new, more energy-efficient CARS vehicles.
• The program resulted in a small gasoline reduction equivalent only to about 2 to 8 days’ worth of current usage.
• In terms of distributional effects, compared to households that purchased a new or used vehicle in 2009 without a voucher, CARS program participants had a higher before-tax income, were older, more likely to be white, more likely to own a home, and more likely to have a high-school and a college degree.