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"Cash For Clunkers" Drives into Reality

Posted By Andrew M. Grossman On January 30, 2009 @ 9:39 am In Economics | Comments Disabled

But for handing over gobs of cash with no strings attached, it would be harder to imagine a more sweetheart deal for the auto industry: According to the Wall Street Journal, Congress is considering a proposal to pay consumers to buy new cars [1]. It could wind up as part of the stimulus package now pending in the Senate.

The program, dubbed “cash for clunkers,” would provide tax credits of up to $4,500 for trade-ins–especially those with poor fuel efficiency. With barely-running clunkers available in many areas for as little as $100 apiece, the credits would be a direct subsidy to auto manufacturers and dealers. (In reality, more than getting old, fuel-guzzling cars off the road, the program would probably pull abandoned autos out of the junkyard or off the front lawn for a single day’s service.)

But the leaders of Detroit’s ailing automakers are having second thoughts:

It isn’t clear that auto makers and Congress will strike a deal. Detroit Three executives haven’t signed off on a plan, in part because they worry that the plan would encourage people to replace their older, American-made cars and trucks with new vehicles made by overseas-based rivals.

This insecurity runs perfectly counter to the Big Three’s displays of confidence in their model line-ups and ability to compete at the recent Detroit Auto Show.

The message this sends is simple and unfortunate: You can’t pay people to drive our cars. That’s something to ponder when General Motors and Chrysler return to Washington next month bearing (still more) turnaround plans and seeking (still more) taxpayer dollars.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2009/01/30/cash-for-clunkers-drives-into-reality/

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[1] proposal to pay consumers to buy new cars: http://online.wsj.com/article/SB123326607809230441.html?mod=djemITP

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