It’s always important to keep unintended consequences in mind with multi-billion dollar programs like Cash for Clunkers. Take the problem of Germany’s Cash for Clunkers program, which debuted in January.
As in the U.S. program, Germany’s initiative offers cash to consumers who trade in their inefficient vehicles for more fuel-efficient ones. But Germany hasn’t implemented the proper safeguards to make sure the clunkers actually end up in the junk pile, and as a result up to 50,000 of the vehicles have been stolen and sold on the black market. Many of them have gone to Eastern Europe, but others are still in Germany. It’s an embarrassing statistic for a country that has spent $7 billion on Cash for Clunkers.
The United States is unlikely to have similar problems. While Germany’s clunkers are sent to junkyards, U.S. vehicles are drained of oil and injected with car-killing sodium silicate. But that doesn’t mean the U.S. won’t have to deal with other problems. The newly guaranteed $2 billion for Cash for Clunkers has been yanked away from renewable energy loans that were provided under a $6 billion Department of Energy program to finance solar and biofuel projects. It’s a trade-off–a temporary boost for the car industry versus a permanent alternative energy infrastructure. So before extending Cash for Clunkers even further, perhaps we should take a better look at the costs and benefits.