“Cash for Clunkers” Comes to a Screeching Halt | Citizens Against Government Waste

“Cash for Clunkers” Comes to a Screeching Halt

The WasteWatcher

This past June, Congress added $1 billion to the 2009 Supplemental Appropriations Act for the “Consumers Assistance to Recycle and Save Act of 2009”.  Though it had no business appearing in an emergency war funds bill, this “Cash for Clunkers” provision established a new one-year program administered through the Department of Transportation’s (DOT) National Highway Traffic Safety Administration (NHTSA) that gave individuals with older, less fuel efficient cars a credit worth up to $4,500 towards the purchase of a new car that met certain fuel efficiency standards.

Unlike other forms of auto-tax credits, consumers never saw this voucher; dealers received the credit and deducted if from the price of the new car.  Though couched as a provision to boost consumerism and improve environmental standards, “Cash for Clunkers” was really meant to be another auto industry bailout.  However, dealers are now wondering why this bailout has left them holding the bag. 

The program officially kicked off on July 1, but because it took the DOT nearly a month to put 130 pages of rules in place, implement an elaborate computer system, and set up a 250-person phone bank to respond to consumer inquiries, claims could not be filed until July 27.  

The new DOT computer system did not operate smoothly; dealers had great difficulty logging into the system and registering their deals.  The government’s processing website, cars.gov, crashed multiple times, and voucher applications were constantly rejected for even the most minor spelling errors.  The sheer volume of requests seemed to be more than the system, or the 225 dedicated NHTSA staffers for that matter, could handle.  (Now imagine the government attempting to run a national healthcare system. Yikes!). 

While most buyers did, in fact, trade their big gas guzzlers for smaller sedans with an average improvement of 9.6 miles to the gallon, their “clunkers” tended to be older, spare vehicles that were rarely driven in the first place.  Even if these new fuel-efficient vehicles could be classified as legitimate replacements for “clunkers,” swapping 450,000 new cars out of 254 million registered U.S. vehicles will have a miniscule impact at best.

The Obama administration touted skyrocketing American car sales, but the limited information released thus far shows that most buyers actually purchased Honda, Toyota, Hyundai, and other foreign vehicles in greater numbers.  

The DOT collected details on 457,000 rebate requests totaling $1.9 billion, but has only approved a small fraction of those requests, leaving angry and frustrated dealers wondering if they will ever recoup their losses.  Not willing to take further financial risks or deal with federal red-tape, many dealers opted out of the “cash for clunkers” program, even despite the influx of new buyers.

Aside from the program’s financial, operational and transparency problems, “Cash for Clunkers” has proved to be quite popular among consumers.  Who wouldn’t want get $4,500 for an old “clunker” of negligible value?  When the program burned through its allotted $1 billion in just one week, lawmakers hastily approved moving an additional $2 billion from a stimulus program that backs loans to renewable-energy companies into the car-repurchase program.  Congress plans to replenish the green energy funds, thereby adding to the federal deficit yet again.

Six weeks and $3 billion dollars later, the program officially ran dry.  The DOT shut “Cash for Clunkers” down at 8 p.m. eastern time on August 24th, with dealers still clinging to their IOUs and Americans bracing themselves for the next profligate federal program.

Erica Gordon

Sign Up For Email Updates


Optional Member Code