Friday, August 28, 2009

Cash for Clunkers

A few days ago Kevin Drum linked to this defense of the cash for clunkers program.

I have a copy of comments. First this:

I don't think the CEA factored in the economic benefit of lowering people's gasoline bill, which puts more money in their pocket to save or spend in their community.

makes no sense. Suppose you drive 12000 miles a year and turn in a clunker getting 15 mpg for a new car getting 25 mpg. This will reduce your yearly gasoline consumption from 800 gallons to 480 gallons. So you are saving 320 gallons a year. At 3$/gallon this is $960 per year. But you have had to pay for the new car. Even after a $5000 rebate this is probably $15000+ out of your pocket. So you will not have more money in your pocket anytime soon.

Second the goal of reducing oil consumption and CO2 emissions and the goal of stimulating the economy are fundamentally in conflict. To the extent this program revives economic activity it will increase oil consumption and CO2 emissions. This is not acknowledged.

No comments:

Post a Comment