Liberal Brookings Institution Admits: Cash for Clunkers a Failure

By:  Thomas R. Eddlem
11/01/2013
       
Liberal Brookings Institution Admits: Cash for Clunkers a Failure

From a recent report it appears the administration's “Cash for Clunkers” program was an almost complete waste of billions of taxpayer dollars. 

The left-leaning Brookings Institution admitted in an October 31 report that the Obama administration's Car Allowance Rebate System, or “Cash for Clunkers” program, was an almost complete waste of billions of taxpayer dollars. The report, entitled "The Car Allowance Rebate System: Evaluation and Lessons for the Future," concluded that the 2009 subsidy for new car buyers had no measurable long-term impact on economic growth and cost $1.4 million for every “job-year” that was created under the program.

When even the schoolmarm of American liberal think tanks admits government “stimulus” spending programs are a failure, that's a singular event. The Brookings study flatly contradicted the Obama White House claims immediately after the program began. The administration had argued that it had economic benefits to the auto industry over nearly three years.

“The program led to a minimal increase in employment of roughly 2,050 additional job-years from June 2009 through May 2010,” study authors Ted Gayer and Emily Parker concluded of the Car Allowance Rebate System (CARS) pushed by President Obama and Detroit automobile company executives, commonly called Cash for Clunkers. Gayer and Parker noted that “The CARS program created 0.7 jobs for each million dollars of program cost, resulting in a cost of $1.4 million per job created.” Note that Brookings concluded the program spent $1.4 million for each “job-year,” not per job. For every year someone worked in the auto industry because of the program, the federal government shelled out $1.4 million taxpayer dollars in subsidies. In essence, the American taxpayers would have been better off if the U.S. government had simply issued $1 million checks randomly to 2,050 unemployed persons. 

Gayer and Parker concluded that the program created “380,000 additional vehicle sales during the time of the program” among the 700,000 Americans who scrapped functioning automobiles in order to take advantage of the government subsidy. But the authors noted that “the net result was a negligible increase in GDP, shifting roughly $2 billion into the third quarter of 2009 from the subsequent two quarters.” In essence the $3,500-$4,500 per car in government subsidies during the Cash for Clunkers program gave consumers an incentive to buy new cars a few months before they otherwise would have bought a new car. But it had no measurable medium-term or long-term positive impact on economic growth. 

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