Cash For Clunkers Offers Stimulus Program That Works

by Tim Jackson, president, Colorado Automobile Dealers Association

When it comes to the federal stimulus package, it’s often been hard to point to concrete and immediate benefits.

In some cases, it seems to a skeptical public that billions of tax dollars were sucked into a black hole, with nothing to show for their investment.

Not so when it comes to the so-called “cash for clunkers' program, officially known as the Car Allowance Rebate System (CARS).

While costing just a tiny sliver of the total amount of the overall stimulus package, CARS has produced immediate and dramatic results. So much so, in fact, that the Obama administration and the U.S. Congress were caught off guard and had to supplement the $1 billion program, which was being drained much quicker than anyone had predicted.

Coming during the longest and most severe downturn in automobile industry history, this was just what the economy needed in order to stem the tide of massive job losses and start turning the corner toward positive results.

Nationally, about 900 franchised dealerships closed in 2008, reducing the U.S. total to about 19,000. Another 1,100 dealerships are expected to close in 2009. Closer to home, five Colorado dealerships closed in 2008 and 19 dealerships in the state have already closed so far this year.

The challenge facing the auto industry is not just an issue for traditional manufacturing states like Michigan.

According to an analysis of the economic impact of new vehicle dealers on Colorado in 2007:

•The automobile retailing industry generated a total of nearly 30,000 jobs in the state, with the average dealership providing jobs for 73 people.

•Colorado residents earned more than $1.5 billion as a result of automobile dealership operations.

•Colorado automobile dealers (through taxes collected or paid) generated more than $418 million in revenue for the state and local governments. In fact, sales of new and used cars, as well as parts and service, are the single largest source of sales tax revenue for almost every state, city and county government nationally.

•Colorado dealerships contributed over $6.1 million to charitable causes.

But like the best stimulus programs, the cash for clunkers initiative has benefits that extend far beyond the economy.

By getting older gas guzzlers off the road, it’s helping the nation breathe easier, both literally and figuratively.

The program is designed specifically to get drivers into more fuel efficient vehicles and it is working. A U.S. transportation department analysis shows that through Aug. 1, cars sold under the program averaged 25.4 miles per gallon, a 61 percent increase over the 15.8 mpg average of the trade-ins, according to Automotive News.

Besides saving drivers money at the pump, that means that the nation is becoming less dependent on foreign oil.

Furthermore, carbon emissions – which have been tied to global climate change – are commensurate to a vehicle’s fuel economy, so cars that get more miles per gallon emit less carbon.

Although the CARS legislation did not specifically target smog-producing vehicles, it will have the added benefit of permanently removing vehicles that contribute to high ozone levels. Ozone causes respiratory problems and endangers people with asthma.

While vehicle exhaust is just one of the many components of ozone pollution, Colorado will benefit from any reduction. Today’s new cars are up to 99 percent cleaner than cars of just 15 years ago.

Could the CARS program have been administered better? Absolutely. The unforeseen popularity put a strain on the systems, although the resulting problems primarily fell on the shoulders of dealers, not consumers.

Cash for clunkers has proven its value – to the economy, to the environment, to Colorado – and it deserved to be continued.

 

 

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