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Cash for Clunkers

Legislation now moving through Congress encourages consumers to trade in their old clunkers for newer, energy-efficient cars.

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Legislation now moving through Congress to encourage consumers to trade in their old clunkers for newer, energy-efficient cars is well timed to help beleaguered automakers, lower our dependence on foreign oil, and clean up the air we breathe. Two new legislative proposals by Sen. Diane Feinstein (D-CA) and Rep. Betty Sutton (D-OH) would introduce a so-called “cash for clunkers” program to provide incentives to registered owners of older high-fuel-consumption cars to replace these cars with fuel-efficient models or vouchers for public transportation.

In the first year of such a proposed program, a person trading in a vehicle that is model year 2002 or later would be eligible to receive $4,500 for purchase of a new vehicle, $3,000 for purchase of a used vehicle, or $3,000 for transit fare credit. For model-year vehicles 1999 to 2001, drivers would get $3,000 for the purchase of a new vehicle. Those who trade in vehicles that came out in 1998 or before could get a credit of $2,000 for a new vehicle. A person could obtain no more than one voucher in any three-year period. Dealers and scrap recycling companies could also get payments of $50 per vehicle. Initial estimates set the cost of the program between $1 billion and $2 billion a year.

Both pieces of legislation clearly would address critical problems in our economy. As the current recession deepens, we are losing jobs in the automotive sector at alarming rates. The number of new cars sold annually in the United States has declined by more than 2 million units since 2005, which has translated into plant closings and the loss of hundreds of thousands of jobs in just a few years.

The environmental benefits of a cash-for-clunkers program are as impressive as the economic and security benefits of reducing our addiction to oil. Cars that are over 13 years old are 10 to 30 times more polluting than newer models. Rapid fleet turnover would translate into dramatic reductions in both greenhouse gases and in the more acute air quality pollutants from older vehicles, such as ozone, particulates, and nitrogen oxides, all of which pose serious threats to public health in high-traffic urban areas.

Above all, however, cash for clunkers would provide much-needed infusion of market demand to the troubled automobile industry, which has seen sales plummet amid the faltering economy. The program has the potential to take millions of the oldest, most inefficient vehicles off the road and shift the entire market toward newer, more economical models, increasing demand and creating jobs. While many cash-for-clunkers participants would likely remain in the used car market, the program would broadly accelerate turnover of the existing vehicle fleet and drive increased sales for the industry as a whole.

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