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What are the Drawbacks of the Cash for Clunkers Program?


Question: What are the Drawbacks of the Cash for Clunkers Program?
Cash for Clunkers is a federal program designed to stimulate U.S. auto sales and help the environment by providing an economic incentive for consumers to replace old, low-mileage vehicles with new, fuel-efficient models that are safer and emit less pollution and fewer greenhouse gases.
Answer: Critics say that industry pressure and congressional politics transformed Cash for Clunkers from a program aimed primarily at helping the environment into just another auto-industry bailout with too few environmental benefits.

The original bill introduced by U.S. Sen. Dianne Feinstein (D-Calif.) in January 2009 would have required old trade-in vehicles to have a fuel-efficiency rating of 15 mpg or less. Vouchers would have ranged from $1,500 up to $4,500 and could have been used to buy new cars or used cars (2004 models or later), so long as the replacement vehicle exceeded government fuel-efficiency standards for its class by at least 25 percent—approximately 28 miles per gallon for passenger cars. Under Feinstein’s proposal, consumers also could have used the vouchers for mass transit.

Many environmental groups endorsed the Feinstein bill, but the auto industry was worried that it would stimulate sales of already popular cars such as hybrids, but not help them move harder-to-sell sport utility vehicles and trucks off their lots. As a result, the industry persuaded lawmakers—specifically U.S. Rep. Betty Sutton of Ohio and U.S. Sen. Debbie Stabenow of Michigan, both Democrats from states where the auto industry is a major employer—to introduce versions with more lenient fuel-economy requirements.

The new proposals introduced by Sutton and Stabenow increased the size of the voucher payments to either $3,500 or $4,500, offered vouchers to people who scrap more fuel-efficient vehicles (18 mpg or less) than under the Feinstein plan, and allowed people to purchase new vehicles that are only slightly more fuel-efficient (trading in a heavy-duty truck that is rated at 15 mpg for one rated at 16 mpg (to receive a $3,500 voucher) or 17 mpg (to get $4,500), for example). Also, under the new proposals the vouchers could only be used to buy or lease new vehicles, not to purchase used vehicles or to use mass transit.

The final bill, which Congress passed in June 2009 and President Obama signed into law, was almost exactly what Stabenow and Sutton had proposed.

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