GAO: Economic Recovery Benefits of ‘Cash for Clunkers’ Are ‘Uncertain’

"Cash for clunkers," the White House’s much-touted program encouraging trade-ins for more fuel-efficient autos, had an "uncertain" impact on economic recovery, according to a new audit from the independent Government Accountability Office (GAO) — largely because it remains unclear how many of the car sales it spurred would have occurred without taxpayer subsidies.

clunker.jpegWere "clunker" trade-ins a good thing for the stalled economy? (Photo: NYT)

The GAO report casts doubt on several of the Obama administration’s claims about the success of the "clunkers" plan, including the extent of its economic benefits and the emissions savings achieved by replacing older autos with more gas-sipping vehicles.

While the GAO’s nonpartisan auditors concluded that "clunkers" program achieved its overall goal of promoting economic growth, they could reach no consensus on how to measure that stimulative effect. A laudatory "clunkers" report from the White House Council of Economic Advisers reached similar conclusions concluded that 64 percent of "clunkers" sales were "incremental," meaning that the trade-ins would have occurred regardless of whether government subsidies were on offer.

The U.S. DOT, using its own surveys, concluded that 88 percent of trade-ins under the program were effectively pushed forward in time; however, the GAO questioned the reliability of that data because the department "did not follow some generally accepted survey design and implementation practices." (ed. note. Streetsblog Capitol Hill contributor Ryan Avent made similar observations in August.)

Apart from its effect on vehicle sales, the trade-in program was also credited by the administration with increasing the U.S. gross domestic product. But the GAO found that assertion equally difficult to prove, citing interviews with auto executives who confirmed only that "clunkers" sales decreased their inventory. "[I]t is not clear how much of the reduction in inventory led to increased automobile manufacturing and, therefore, a positive impact on Gross Domestic Product," the auditors wrote.

The GAO found more holes in the administration’s assertions about pollution savings achieved by the $3 billion "clunkers" plan.

The U.S. DOT concluded that the average beneficiary would consume 10 percent less fuel as a result of trading in their older autos, but that figure was estimated using the same flawed methodology that resulted in the 88-percent "incremental sales" figure.

In addition, the U.S. DOT did not attempt to measure the emissions generated by scrapping the traded-in "clunkers" and manufacturing the new vehicles purchased, which "may offset some of the program’s effect on emission reductions," according to the GAO.

Interestingly, the congressional Democrats who helped pass two rounds of "clunkers" spending depicted the GAO audit as a vindication of their efforts. Rep. Betty Sutton (D-OH) issued a statement calling the program “an overwhelming success," suggesting that the environmental effects of the auto trade-ins were ancillary:

The ["clunkers"] program was about more than just cars. It was about people. It was about our friends and neighbors who depend on auto-related jobs to support their families. And,
it was about our communities that depend on auto-related jobs for their
tax base to support our schools, police, fire and other city services.

  • “In addition, the U.S. DOT did not attempt to measure the emissions generated by scrapping the traded-in “clunkers” and manufacturing the new vehicles purchased, which “may offset some of the program’s effect on emission reductions,” according to the GAO.”

    This was my biggest objection to the whole project. There is a huge amount of energy and pollution inherit in the production process that is better to just leave the older cars on the road then force replace them.

  • IanM

    Actually, the program was a gigantic act of economic destruction. What could possibly be environmental friendly or economically efficient by destroying thousands of cars?!?!

  • IanM

    And that photo is very misleading. Most of the “clunkers” were perfectly good vehicles.

  • What’s good for GM is good for America.

ALSO ON STREETSBLOG

How to Judge “Cash for Clunkers”

|
(Photo: NYT) At this point, it’s difficult to know exactly what the government’s "cash for clunkers" program is supposed to accomplish. Claims about its economic and environmental benefits are increasingly detached from reality, and the chief advantage of the program would seem to be that it "worked," in the sense that it was popular among […]

Separating Myth from Fact on “Cash for Clunkers”

|
As debate rages on in the capital over whether to keep assisting the auto industry by giving out more "cash for clunkers" rebates, two assertions are becoming commonplace: the program is helping diminish U.S. oil consumption, and the program is not paid for with new money. (Photo: AP) The first argument was reiterated on Friday […]

As “Cash for Clunkers” Sputters, a Privately Funded Spinoff Picks Up

|
The U.S. DOT began signaling yesterday that it would bring the "cash for clunkers" program to an end amid growing unease from auto dealers about the government’s slow pace of reimbursement and General Motors’ decision to begin fronting "clunkers" repayments to its own salesmen. (Photo: AmericaJR.com) But with auto-industry forecasters predicting a cool 1 million […]

Brookings: “Cash for Clunkers” Wasn’t Worth It

|
Turns out paying people to buy cars isn’t a great policy for the economy or the environment. That’s the determination of a pair of Brookings Institution researchers who evaluated the effectiveness of the 2009 Cash for Clunkers program. The $2.85 billion program, part of President Obama’s economic stimulus package, produced only 2,050 “job-years,” according to researchers […]