It seems like an easy solution. Give car buyers a voucher to exchange their older gas guzzlers for newer models with improved fuel economy. Thousands of car owners would jump at the chance to purchase a new car that saves them money on gas. An ailing US auto industry will get a lion’s share of that new business, giving it a much needed boost.
Here’s the plan. According to the details of a ‘cash-for-clunkers’ bill just passed in the House of Representatives, if your trade-in averages 18 miles per gallon or less, you will be able to get a $3,500 voucher toward the cost of a new car that averages at least four miles per gallon more.
If you trade in your ‘clunker’ for a new car that averages 10 miles per gallon or better you would qualify for a $4,500 voucher towards the purchase of a new car.
The goal is to sell better fuel economy cars and reduce emissions of harmful pollution, especially greenhouse gases that cause global warming.
The House plan comes with some conditions. It would last only one year, and cars that are more than 25 years old won’t qualify. Also, if you’ve failed to maintain proper auto insurance, you won’t be able to use the program either.
Industry experts say that the program could lead to 500,000 new cars sold. Further, the subsidy would probably impact truck sales the most as trucks on the road today are most likely to fit in the ‘clunker’ category. This category would mostly benefit US-based automakers who have the largest share of the truck market.
Reportedly, the House version of ‘cash for clunkers’ bill is to be added to the war supplemental funding bill, further complicating an already controversial bill. A Senate version of the bill would require higher fuel economy standards in order to qualify for the voucher. None of the bills in Congress confine the vouchers to purchasing vehicles made by US-based auto companies or to union-made vehicles.
Still, UAW President Ron Gettelfinger praised the plan, in a statement last month. ‘This will give consumers an incentive to purchase high-quality, fuel-efficient vehicles,’ he said. ‘Putting environmentally friendly vehicles on the road will provide substantial benefits in reducing oil consumption and greenhouse gas emissions.’
President Obama has expressed support for a cash for clunkers program, but has not yet endorsed any specific bill.
Some environmentalists are quietly skeptical about the idea, however. The House version of the program seems to run counter to the high fuel economy standards (averaging more than 35 miles per gallon) the President recently established, since it would provide subsidies to buy a lot of cars with far lower fuel economy rates. Further, serious new investments in mass transit seem like a better alternative than putting more cars on the road – both for creating new business for automakers and for reducing emissions.
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