Why Cash for Clunkers Ran Out of Money

Amid conflicting reports this morning about whether the Cash for Clunkers program is still operating (there is some indication that the Obama Administration suspended it at midnight, after the $1 billion fund ran dry, while statements out of the White House this morning seem to indicate they're looking for a new source of funding) it ought to be obvious why its runaway success is a failure.

Update 1:33 p.m.: The House has voted to spend another $2 billion on the Cash for Clunkers program, according to the Washington Post, swiping the funds from an energy loan fund guarantee program.

The government bought a lot of clunkers.

The program was originally conceived to accomplish multiple goals:

Economically, it was supposed to boost he ailing U.S. car industry by helping to jumpstart the market for new car sales.

Politically, it was supposed to please voters who like getting rebates of up to $4,500 for doing nothing.

Environmentally, it was supposed to replace the oldest, most highly polluting cars on the road with new and efficient models.

Originally, the bill Congress discussed did a lot to bolster that third goal: There was a provision for using trading clunkers in for public transportation credits, and a provision to allow for the purchase of a highly efficient used car. The new cars that qualified had to meet strict fuel economy standards.

All that flew out the window, though, when the plight of the automakers took center stage. The final program Congress approved was so weak it subsidizes more bad decisions. You can trade in a junky truck for a new clunker that gets as little as 15 mpg. You can trade in an old SUV for one that gets as little as 18 mpg. And you can swap either for a car that gets as little as 22 mpg.

In just two years, every automaker must reach the federally mandated fuel economy standard of 27.3 mpg. In other words, we taxpayers just bought a bunch of cars, trucks and SUVs that are well below average vehicles.

Congress tossed its the environmental goal out the window like a cigarette butt, and its voter satisfaction goal is likely to follow. It seems likely that either many Americans won't be able to take advantage of the program, or else taxpayers will be asked to pay more to fund it's extension. That isn't likely to please many. If Congress had set the bar higher, there would have been a smaller pool of people interested in taking advantage of the program, and the overall satisfaction would be higher.

There's no data available yet about which cars Americans actually chose to buy after trading in their clunkers. It could be they bought only the most fuel-efficient 2009 vehicles, and that would be a great improvement for the environment, given that transportation contributes significantly to global warming, smog and acid rain. (If you are still eligible, see these Cash for Clunkers tips to magnify the value of the government subsidy, for both you and the environemnt.)

If only Congress had built the assurance of that end result into the program.

Do You Think a $4,500 Trade-in Credit for Gas Guzzlers Is a Good Idea?

Tell us by commenting below, or take the poll (www.thedailygreen.com/clunkers).