Cash For Clunkers: Government Accountability Office Weighs In

The Consumer Assistance to Recycle and Save (CARS) Act was signed into law on June 24, 2009. Remember we all knew it as “Cash for Clunkers.”

Last summer Congress directed the Secretary of Transportation to establish and administer a vehicle retirement program through which owners of vehicles meeting statutorily specified criteria could receive a monetary credit for trading in their vehicle and purchasing or leasing a new, more fuel-efficient vehicle

The Government Accountability Office GAO) has now completed its review of the program and the report is here.

The GAO cited the two main purposes of the program were to: 1) to help stimulate the economy and (2) put more fuel-efficient vehicles on the road. They went on to say “The program achieved these broad objectives; however, the extent to which it did so is uncertain. For example, nearly 680,000 consumers purchased or leased vehicles using the program’s credit, yet some of these sales would have happened anyway.”

We at Reason had our concerns with the program writing many articles shown here. As you notice, we wrote through out the summer about with our doubts. Even John Stossel weighed in here.

GAO goes through a lengthy discussion of the statistics as presented by various government agencies and private groups claiming success. The agencies range from US Department of Transportation, the National Highway Traffic Safety Administration, the Council of Economic Advisors and the Bureau of Economic Analysis. Also reviewed were the private sector analyses from Maritz Automotive Research Group and The statistics were less than satisfactory to GAO often measuring different outcomes and providing conclusions which did not line up with data.

The program was originally authorized for four month however ended up in place for only two months. A wonderful map showing participation across the country appears on page 25.

Similar programs from the states and other countries were review by GAO and are summarized on pages 30 and 31. My colleague Bob Poole wrote about one of the California programs versus the Cash for Clunkers legislation in his July, 2009 newsletter

While the GAO looked for lessons learned, the conclusions are important:

  • First, the program produced economic and environmental benefits, achieving its broad objectives. However, the extent of the program’s effects is uncertain.
  • Second, before a program is underway, steps must be taken to determine what impacts are going to be measured and what data will be required to measure them. Moreover, steps must be taken to ensure that the data are reliable.
  • Finally, given the number of stakeholders that are financially affected by the auto industry, it would be important to collect and consider information on how a future program would affect these stakeholders and take mitigating actions, as appropriate.

Interesting report and worth a read as an assessment of Cash for Clunkers.