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Editorial: Trade-in program aids car industry, not Earth

Tue., July 7, 2009

Here’s an idea: Hitch a tow truck to Cash for Clunkers and haul it to the junkyard of bad political ideas. OK, it’s too late for that, but this program, which runs from July 1 to Nov. 1, can be improved in the fall if it isn’t killed outright.

Cash for Clunkers was slipped into the latest defense appropriations bill, which meant members of Congress had to vote against larger military items, including the current wars, to express dismay with this $1 billion program. So it passed.

It works like this: If you have a vehicle that’s worth $4,500 or less, you can trade it in for a $3,500 or $4,500 voucher toward a new vehicle as long as the new vehicle gets better gas mileage. Then the dealer must junk the old car. No resales.

The size of the voucher is determined by the improvement in fuel mileage. If the new car gets at least 10 more miles per gallon, then it qualifies for a $4,500 credit. If the improvement is between four and 10 mpg, then that deal fetches a $3,500 discount. If you’re trading in a “light truck” (sport utility vehicle, minivan or smaller truck), the difference only has to be two mpg.

Programs like this make sense if they’re designed to reduce dependence on fossil fuels and limit greenhouse gas emissions. But this plan has only the new car market in mind.

There’s no policy reason why the government should preclude the purchase of a better used car. For instance, this plan prohibits the purchase of a 2006 Toyota Prius or any late-model, fuel-efficient car, but it allows for the purchase of a new SUV that gets worse mileage and emits more pollutants.

Many people who drive vehicles worth $4,500 or less do so because they can’t afford a new car or can’t qualify for a loan. So such a program is more helpful to those who don’t need it. Plus, because the mileage differences are so small, someone could turn in an old SUV that gets 18 mpg for one that gets 20 mpg. That newer version is likely to be driven more, which would offset fuel savings or environmental benefits.

We question whether the government needs to provide more handouts to the auto industry. But reordering the priorities of the program would bring about more public benefits. To do that, the government must widen the fuel mileage gap between old and new cars and drop the mandate on new car purchases.

Better still, government leaders could screw up the courage to face the problem head-on by imposing a significant increase in the federal gas tax, which would achieve the same goals but with a wider reach and greater efficiency. Barring that, a Cash for Clunkers idea has merit if it undergoes repairs at a reputable public policy shop.