Eric's Blog

This year’s economic-stimulus package contained a huge range of ideas and programs in its many hundreds of pages and hundreds of billions of dollars of appropriations. Few of those ideas and programs have been as immediate a hit as the so-called “Cash for Clunkers” plan, which gives car-buyers vouchers worth up to $4,500 for trading in their low-mileage vehicle for one that’s significantly more fuel-efficient.

It’s been so big a hit, in fact, that in just one week, it exhausted the $1 billion Congress initially set aside, while depleting the supplies of available vehicles on at least some dealers’ lots here in California. Buyers loved it, the auto companies loved it, dealers loved it and the environment will love it.

I love it, too. It’s the sort of smart, pragmatic, market-aware approach to a set of thorny problems that leverages a modest amount of government money as a catalyst that achieves several important goals at once:

· Need to get the economy going? The government incentives were big enough to encourage a wide swathe of people to open their wallets in the still-stumbling economy and buy a new car.

· Need to stabilize a shaky domestic car industry? Nothing helps like a huge sale that doesn’t hurt your profit margins and clears out inventory. July was the best month of the year so far for carmakers, so good they may need to get those factories building more of the highly efficient vehicles that we need to have an internationally competitive auto industry.

· Need to improve the air? The eligibility requirements, tiered to provide some consumer choice and flexibility, required that older, high-emission cars would be exchanged for vehicles with significantly better fuel efficiency. In fact, U.S. Senators Dianne Feinstein and Susan Collins said federal data showed the 250,000 people who’ve already used the program bought cars with mileage improvements that averaged nearly 10 miles more per gallon, much higher than initially projected.

· Need to restart global conversations about controlling greenhouse gases? The Cash for Clunkers program will not only reduce the amount of vehicle-created greenhouse gases blamed for global warming, it sets a strong example for other countries as the Obama Administration lobbies for renewed talks on this complex but vital issue.

· Need to reduce dependence on overseas oil? Less fuel use equates to less need to import oil, and less need to incidentally finance the operations of so many problematic oil-rich but repressive governments.

· Need to help reeling local governments save jobs and provide vital services? The taxes generated by increased vehicle sales will boost the coffers of cities, counties, states and other local government entities.

So, with the lever of a comparatively modest amount of incentive money, the Cash for Clunkers program has been a huge hit, helping move the country a bit closer to achieving an array of important goals. I hope that Congress will quickly re-up the program to ensure continuity and certainty for consumers and dealers, to the benefit of the country.

Just as importantly, I hope we continue to look for other smart solutions. We need more programs that pragmatically achieve important goals by leveraging market forces with intelligent leadership and catalyzing investments. We have a lot to get done and need to be smart, and quick, about it.

This entry was posted by Eric on on Wednesday, August 5th, 2009 at 9:51 am and is filed under Environment, Jobs and the Economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.