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GAO: Economic Recovery Benefits of ‘Cash for Clunkers’ Are ‘Uncertain’

8:29 AM PDT on April 30, 2010

"Cash
for clunkers,"
the White House's much-touted program encouraging
trade-ins for more fuel-efficient autos, had an "uncertain" impact on
economic recovery, according to a new audit from the independent
Government Accountability Office (GAO) -- largely because it remains
unclear how many of the car sales it spurred would have occurred without
taxpayer subsidies.

clunker.jpegWere
"clunker" trade-ins a good thing for the stalled economy? (Photo: NYT)

The
GAO report
casts doubt on several of the Obama administration's claims about the
success of the "clunkers" plan, including the extent of its economic
benefits and the emissions savings achieved by replacing older autos
with more gas-sipping vehicles.

While the GAO's nonpartisan auditors concluded that "clunkers"
program achieved its overall goal of promoting economic growth, they
could reach no consensus on how to measure that stimulative effect. A
laudatory "clunkers"
report
from the White House Council of Economic Advisers reached
similar conclusions concluded that 64 percent of "clunkers" sales were
"incremental," meaning that the trade-ins would have occurred regardless
of whether government subsidies were on offer.

The U.S. DOT, using its own surveys, concluded that 88 percent of
trade-ins under the program were effectively pushed forward in time;
however, the GAO questioned the reliability of that data because the
department "did not follow some generally accepted survey design and
implementation practices." (ed. note. Streetsblog Capitol Hill
contributor Ryan Avent made similar observations in
August
.)

Apart from its effect on vehicle sales, the trade-in program was
also credited by the administration with increasing the U.S. gross
domestic product. But the GAO found that assertion equally difficult to
prove, citing interviews with auto executives who confirmed only that
"clunkers" sales decreased their inventory. "[I]t is not clear how much
of the reduction in inventory led to increased automobile manufacturing
and, therefore, a positive impact on Gross Domestic Product," the
auditors wrote.

The GAO found more holes in the administration's assertions about
pollution savings achieved by the $3 billion "clunkers" plan.

The U.S. DOT concluded that the average beneficiary would consume
10 percent less fuel as a result of trading in their older autos, but
that figure was estimated using the same flawed methodology that
resulted in the 88-percent "incremental sales" figure.

In addition, the U.S. DOT did not attempt to measure the emissions
generated by scrapping the traded-in "clunkers" and manufacturing the
new vehicles purchased, which "may offset some of the program’s effect
on emission reductions," according to the GAO.

Interestingly, the congressional Democrats who helped pass two
rounds
of "clunkers" spending depicted the GAO audit as a
vindication of their efforts. Rep. Betty Sutton (D-OH) issued a
statement calling the program “an overwhelming success," suggesting that
the environmental effects of the auto trade-ins were ancillary:

The ["clunkers"] program was about more than just cars. It was about people. It was about our friends and neighbors who depend onauto-related jobs to support their families. And,it was about our communities that depend on auto-related jobs for theirtax base to support our schools, police, fire and other city services.

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