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By Robert Rapier on Aug 12, 2009 with no responses

A Better Alternative to Cash for Clunkers

Today is my last day of work as Engineering Director for Accsys Technologies/Titan Wood. After today, I will continue to maintain an advisory relationship with the company, as I still thoroughly believe in the company and the technology, and I want to help them succeed.

However, tomorrow I board a plane to Hawaii to begin a new role. I have discussed that role briefly in the past, and will elaborate on it in the future. But that’s not what this post is about.

For the past year and a half, I have managed to live without a car. I was able to do that because I spent so much time overseas, and I didn’t need a car in those situations. I walked, I biked, I rode a bus, or I took the train. At times I have needed a car here in the U.S., and when I did, I rented one. But once I get to Hawaii, I think my days without a car have to come to an end. Before I go to work each morning, I have to drop kids off at two different schools, and the area I will live in gets a lot of rainfall. Therefore, I have decided to go ahead and get a car.

Previously, when I was considering getting a car, I asked readers for suggestions. In fact, it was a year ago this week that I thought I was going to have to buy one, so I put up a post asking for suggestions. Some pretty good suggestions came out of that post, but I ultimately decided to postpone my purchase. I don’t believe I can postpone it any longer, so I will start shopping for a car shortly after my arrival. (Again, suggestions are appreciated).

As I began my preliminary search on the Internet, it seemed to me like there weren’t that many good deals to be had for what I was looking for. Unfortunately for me, I don’t drive a clunker, so I am not eligible for those recent stimulus funds that were made available. And because the stimulus funds have driven demand to the highest levels in quite some time, it seems to me that dealers aren’t likely to be as amenable to offering a good deal to me, as opposed to someone who will bring in a $4,000 stimulus check. This has left me wondering, “Where’s my stimulus?”

I am certainly not opposed to incentivizing the purchase of fuel efficient vehicles. In fact, I have suggested before that the government offer rebates for vehicles that achieve certain levels of fuel efficiency. You could pay for these rebates with a penny a gallon gas tax, which would bring in upwards of $1 billion a year. If you then turned around and used that money to offer $1,000 rebates on the first million cars sold each year (out of a total of 7-8 million passenger vehicles sold in the U.S.) that meet certain fuel efficiency standards, you would incentivize fuel efficiency.

Instead, what we have done is to reach into a seemingly bottomless well of deficit spending and offer up overly generous incentives to just those who were driving old clunkers that probably weren’t going to be on the road that much longer anyway. The fact that the first $1 billion was gone in less than a week should tip the government off that they were throwing far more money at this issue than was necessary.

That was the point of my recent post criticizing the Cash for Clunkers program. It isn’t that I don’t agree with the intent, it is just that we spent far too much for what was achieved. As I pointed out in that essay, based on the projections of fuel savings, we spent $13.89 for each gal/yr of gasoline saved. And by “spent”, I mean we increased the national credit card bill that is the deficit, and which we are going to hand to our children to pay. (Incidentally, that is by no means a partisan criticism; Bush ran up enormous deficits that will haunt us for years).

So there is my alternative to Cash for Clunkers. Increase gas taxes by a cent, and offer $1,000 rebates to everyone who meets specific fuel efficiency standards with their purchases. I would put a sliding scale on it so that cars that get 30 miles per gallon (mpg) get $1,000 and cars that get 40 mpg get $2,000. And if a penny a gallon wouldn’t pay for the program, increase it to two cents a gallon.

Boosting the fuel efficiency of the fleet should reduce gas consumption anyway, which means that even the most vehement anti-tax critic out there should see that the two cents may ultimately translate into a savings on the cost of gas. But it would also mean that we are paying for the program as we go along, instead of handing the bill to our children. We simply can’t continue to burden the next generation with debt, or their quality of life is going to be lower as a result of the choices we have made.

Note: As noted earlier, I am now in transition to Hawaii. I am not certain about how quickly I will have Internet access and reestablish communications. So this will be my last post for at least a few days, and maybe a week. I will be back online as soon as possible.