Cash for Clunkers…Not So Clever

Remember the Car Allowance Rebate System? Of course you don’t: the formal name and the acronym, CARS, didn’t stick outside the Beltway. But you probably can recall the program by its moniker, “Cash or Clunkers,” a stimulus program in 2009 that was crafted to appeal to everybody from automakers to  environmentalists to owners of aging gas-guzzlers – not to mention policymakers eager to inject purchasing power into the economy in a timely fashion.

CARS was extremely popular. Who could resist a program designed to counter the post-bubble economic contraction even as it created bargains for car shoppers, increased fuel efficiency and helped to clean up the exhausts of America’s 250 million-plus fleet of cars and light trucks? That said, it’s still important to know how much bang the program got for a taxpayer buck in terms of jobs, economic activity and emissions reductions. We offer estimates implying that the hype exceeded the benefits.

But this, by definition, is hindsight. Although no one is proposing CARS II, the more elusive issue here is whether broader lessons can be drawn from the disappointing outcome to an emergency program offered in the midst of a global crisis.