The co-architect of the Cash for Clunkers (CFC) program, Jack Hidary, couldn’t be happier with the program’s “success”. He’s pleasantly surprised that people like to be handed money (even the government-stay-out-of-my-lifers). Jack has stated that CFC “achieves multiple goals – it stimulates auto sales while increasing the efficiency of the U.S. fleet.” It does seem to have stimulated auto sales and has helped to clear inventory from car lots (though it also seems to have particularly spurred the sales of foreign cars). Many believe that CFC is simply shifting sales to an earlier date. To alter the market consumers would need to increase turnover or we would need to own more cars. Americans already own 780 cars per 1,000 population. That’s 217 MORE per 1,000 than Canada. Car ownership in America cannot increase much and cars are lasting longer as well.
Getting more efficient vehicles on the road is inherently a good thing, but the bar is set so low with CFC that the benefits are often negligible. To be eligible for CFC, your trade-in must have been manufactured in 1984 or before and have a combined fuel economy of 18 miles per gallon or less. The new vehicle’s fuel economy must exceed the trade-in’s by at least 4 mpg for cars, 2 mpg for SUVs and 1 mpg for large trucks to qualify for the $3,500 rebate. The full $4,500 rebate requires an increase of 10 mpg, 5 mpg and 2 mpg. So far, according to the Washington Post, CFC new vehicles average get 25.4 mpg while trade-ins average 15.8 mpg.
So, $1B has been spent to-date and another $2B appears to be on the way. Anyone willing to bet that this will be the end of the program? I expect an additional $2B or more down the road as the program appears to appeal to liberal and conservative voters alike (though not uniformly).
But what else could we do with $5B to increase transportation efficiency? Mayor Bloomberg has an idea: fare-free cross town buses. The Urban Workshop is a passionate advocate for fare-free mass transit. What better way to increase the efficiency of travel than to encourage people to utilize mass transit? Even $5B would not go far to providing funds to allow major mass transit systems to go fare-free, but it could be used as an incentive.
Even more efficient would be having just a few people ride bicycles instead of drive. Bicycling is the most efficient mode of transportation known to man, more efficient than walking. By one measure, a bicycle gets the equivalent of 653 mpg. If the average clunker gets 16 mpg and the owner receives $4,500 to purchase a new 25 mpg vehicle, CFC is paying $500 for each 1 mpg improvement. Perhaps I can offer to sell my 2001 Honda Civic (~27 mpg) and buy a bicycle. I would expect a $500 per each mpg improvement of course, or $313,000. I would then pimp my bike. Lots of gold and velvet.
If we spend $5B on CFC, ~1.25M clunkers will be traded-in and will result in a “savings” of 11.25M mpg. How many clunkers for bicycles would be needed to meet this efficiency gain? 17,661. Yep, fewer than 18,000 people choosing to ride a bicycle instead of driving would have the same affect on transportation efficiency. And what would that cost? We can be generous and offer to purchase a $1,000 bicycle. Total cost = $18M. $18M!
The auto sales argument falls flat. The efficiency argument is narrow-minded and continues to wed Americans to the automobile while extraordinarily less costly and more healthy alternatives are ignored. It’s time to drop the car-centric policy and create a true transportation policy in the US.