'Cash for Clunkers' Cost Automakers Billions

'Cash for Clunkers' Cost Automakers Billions

"Cash for Clunkers" was part of the 2009 "stimulus" ostensibly to both jumpstart the economy and save the American auto industry. Just bring in your old gas-guzzler and receive a tax credit for a new fuel-efficient car. Researchers at Texas A&M University recently released a study showing that Clunkers not only didn't work, it was actually harmful to the auto industry. The study authors explain: "Cash for Clunkers was a 2009 economic stimulus program aimed at increasing new vehicle spending by subsidizing the replacement of older vehicles. Using a regression discontinuity design, we show the increase in sales during the two month program was completely offset during the following seven to nine months, consistent with previous research. However, we also find the program's fuel efficiency restrictions induced households to purchase more fuel efficient but less expensive vehicles, thereby reducing industry revenues by three billion dollars over the entire nine to eleven month period [emphasis added]. This highlights the conflict between the stimulus and environmental objectives of the policy." In other words, the American people were sold another lemon