Is 'Clunkers' Helping Or Hurting The Environment?

Probably a negative affect.

I can't remember the source, but it was reputable. The results of a poll found that the average driven mileage for the clunkers traded in was about 6,000 miles per year at an average fuel economy of about 14 mpg.

The average new car fuel mileage that replaced these "clunkers" was about 24, if memory serves. Many bought trucks or SUVs. However, new cars typically get driven more because they are new, its fun, and the warranty keeps them on the road for no owner costs.

If the replacement cars are driven 12,000 miles per year, the normal mileage for the average driver, then there is a net loss in annual fuel savings.

I'm a bit skeptical that all or even most who took advantage of this program would suddenly double their annual miles driven and would continue to do so for the life of the automobile.

The report said average. That means some did more and some did less.

That is completely different than all or most.

Your speculation that "on average" the program participants will double their miles driven per year is based on what? We really have no way of knowing this. Your reasons given were that driving their old car wasn't fun and because of the lack of a warranty.

I could just as easily speculate that the fun wears off after 1 year and they reduce miles driven by, say, 1/4. And as they approach the 5 year warranty expiration, they gradually reduce miles driven until at the 5 year mark they're back to approximately 6000. No fun, no warranty.

Accepting the 12,000 MPY figure just for the sake of argument, the new-car owners will on average have to maintain that MPY for the length of time that they were going to keep the clunker had the program not come about. So...if on average the clunkers were going to be on the road for, say, another 3 years then the new car owners must also on average nearly double their MPY over the same time period in order to push the economy average into negative territory.

It's my completely unsupported and purely opinion-based opinion that this would not occur. Of course, you milage may vary.

Whatever. I did not write the article and I did not do the polling to generate the numbers. You may be right, but it will be hard to know for sure.

In the end I suspect that the impact of this 3 billion dollar handout will really not be the panacea that the authors and supporters sold us (not that we had an up or down vote on it).

As I said in a different post, this is simply a three billion dollar reward to people for making bad purchasing decisions, paid for by tax payers.

The biggest flaw in the "Clunkers" program is that it does nothing for the American economy. Older American cars can be traded in for imports. Why wasn't the program designed to support American built new cars. (Note; American built, not American manufacturers. I have no problem giving assistance to foreign makes built here.)

In part, that makes sense, but then it becomes protectionism.

A more fundamental question is, why do we reward people's past bad behavior by gifting them $4,500 for buying a gas hog?

And, we do it with tax payer money!

& what would be wrong with protectionism?

Taxing imported goods & services would go a long way to reverse the economic suicide we have been committing in the name of "Free Trade". Free markets are fine as long as everyone is playing by similar rules.

"& what would be wrong with protectionism?"

Fair question.

Imagine that we are different trading countries. I produce product A, which sells well in your country. You sell product B, which sells well, too.

Now, I want to help my domestic companies get a greater market share in my country, so I apply import taxes on your product so that the consumer must pay 20% more than what my domestic product costs. Pretty smart, eh?

Actually, I just shot myself in the foot! You cleverly respond in kind and hike import duties on my exported product. My export sales fall through the floor because I can't compete with your domestic countries prices. If I lower my prices, you raise your taxes.

If the process runs open loop, pretty soon there is no such thing as domestic trade between us and we no longer become "friendly" because we have nothing in common or to gain by the relationship.

Effectively, we started a trade war and we both loose.

On a personal level, I do 50% of my real business overseas. If my country decided to cut imports to the USA, then so will the countries we export to. I will loose 50% of my business and join the ranks of the unemployed because I have few overseas competitors and I don't have the luxury of increasing my domestic market share much beyond its existing level. My income depends on a free market.

I agree with you that free markets must have a level playing field. Import duties attempt to do that, but it is a diplomatic juggling act to strike a fair balance between all parties and avoid a trade war.

Lastly, since GM and Chrysler have both sold out to the government and are effectively owned by the government, I could not care a rat's tail what happens to them. At least Ford had the testicles and foresight to see what the "free" government money meant and ran away as fast as they could from the bargaining table.

If I were looking for a domestic car I would give Ford the first opportunity to sit in my garage over GM or Chrysler and even if I did qualify, I would not take a government handout (i.e., your tax dollars) to do it.

I'll start from the end.

I agree that Ford at least made an attempt to stave off bankruptcy... I've had ford trucks for years, reasonably good.

I don't agree about taking a fed handout. That is alot like not accepting unemployment out of principle

I understand your example of straight up import taxes. We all know it is much more complicated. Many companies have out sourced the profits, by moving corporate headquarters to tax havens.

Moving towards consumption taxes, would probably help.

As this program [cash for clunkers] clearly illustrates, government [economic policy] can promote or deter individual economic decisions.

Clearly the Chinese government understands that keeping the yen undervalued, will keep their growth gravy train rolling

I don't pretend to know or understand these issues...

Increasing transportation costs will tend to promote local & regional manufacturing.

"That is alot like not accepting unemployment out of principle"

Last year my job was suddenly axed. I had about 1 to 2 months savings, a family, mortgage, car payments, and I was the principle bread winner. I declined unemployment compensation because I was healthy, able to work, and I believed that I could earn my own way.

So, I started my own business and it has paid all my bills so far. My income is on track to beat my previous salary. Was it scary? Hell, yes!. Was it hard? Hell, yes!

If I don't need to suckle off the mammary glands of other people's earnings, I won't. Those are just my scruples.

"Many companies have out sourced the profits, by moving corporate headquarters to tax havens."

That's because our taxes are too high! Obama wants to raise them even more. Take a look at some of the state that have high taxes (like New York) and you will notice industry and businesses are starting to exit those states. This causes a tax revenue drop, so they raise taxes even more (like New York), which speeds up the exodus even more.

"Increasing transportation costs will tend to promote local & regional manufacturing."

No, it will increase the cost you pay for everything you buy from groceries, fuel, to utilities because every business will pass that cost on to the consumer. Better hope you are up for a raise soon.

Oh, and just wait for what is coming next. You know all that money we have been printing like mad lately? Can you say inflation?

So you never paid into the system?

I suppose you won't collect social security...

Do your principles always supersede ROI?

Er, Japanese Yen or Chinese Yuan?

When folks bought these cars, we were not as enlightened as we now are. Good folks like you have shown us the errors of our ways, and the newly enlightened government has added the carrot to ease us out of our former bad behavior.

We promise to be better in the future, if you will help us buy shiny new cleaner running automobiles.

Most likely not going to make the hoped for huge petroleum usage improvement, but will keep a few car dealers going for a while longer.

While the goal of replacing 750,000 low mileage cars with higher mileage cars (and "stimulating" the economy) appears reasonable on the surface, The "cash for clunkers" concept to achieve the goal is seriously flawed.

If one had a car getting 14 mpg and drive the average of around 12,000 miles per year and traded it in for one getting 28 mpg, @ $2.50 a gallon one would save a little over $1000 a year. If the new car costs say, $20,000 after a $4,000 credit, one would have to be able to afford a payment of over $300 per month (on a max. 5 year loan). The $70+ a month savings from the stimulus would have to create the afford-ability? That is not going to be enough incentive for those who provide their transportation by buying a clunker (under $2000) every 2-3 years, which will now become scarce and maybe even more expensive. Many who can afford the payment either have or will obtain a clunker to turn in for the net savings!

Beyond this, if the concept bears ideological merit, why stop there? Why not leap frog the proven innovation/market concept of improvements and have the government just tax everyone and throw money at replacing everything that is not the latest energy technology? Power generation, appliance , HVAC etc. companies (although not 60% owned by the government "yet") could use some stimulus too! Consumers and the market are the only entities that can afford to pay for this, not the government extracting over 70% of it's revenue from 10 % of its citizens (obviously 50% of the citizens who provide only 3% of the revenues would disagree).

"...and have the government just tax everyone and throw money at replacing everything that is not the latest energy technology?"

Wait. ;-)