Barack Obama's presidency has become a feast of failures whose proliferation protects their author from close scrutiny of any one of them. Now, however, we can revisit one of the first and see it as a harbinger of progressivism's downward stumble to HealthCare.gov.
“Cash for Clunkers” was born with Obama's administration as a component of his stimulus. Its fate is a window into why the recovery has been extraordinarily weak, and into what happens when progressives' clever plans collide with recalcitrant reality.
Consumers could trade in older vehicles and receive vouchers toward the purchase of a new, more fuel-efficient car. The vouchers were worth $3,500 or $4,500, depending on the difference in fuel economy between the trade-in and the new purchase. The program's purposes were economic stimulation and environmental improvement.
Now a study by Ted Gayer and Emily Parker, published by the Brookings Institution, a mildly liberal think tank, concludes: “The $2.85 billion in vouchers provided by the program had a small and short-lived impact on gross domestic product, essentially shifting roughly a few billion dollars forward from the subsequent two quarters following the program.”
Most of the 677,842 sales were simply taken from the near future. That many older vehicles were traded in — and, as required by law, destroyed. Gayer and Parker accept as reasonable an estimate that the cost per job created by the program was $1.4 million. Although the vouchers did not come close to covering the cost of the new cars, voucher recipients seem not to have reduced their other consumption.
This, say Gayer and Parker, suggests that participants in the program “were not liquidity constrained,” which is a delicate way of saying “there was no change in other consumption patterns,” which is a polite way of saying “cash for clunkers” merely caused people to purchase vehicles “slightly earlier than otherwise would have occurred.”