As industries grapple with the COVID-19 pandemic, the new normal it brings, and a slow-but-steady reopening of business, there is no shortage of proposals in Washington for how the federal government can provide assistance to businesses and industries most harmed. Some of these proposals are smart and may be necessary in the weeks and months ahead. Others appear opportunistic and more intended to advance a special-interest agenda than solve a problem.
A proposal put forth by the Transportation Electrification Partnership (a collection of foreign automakers and Tesla, utilities, electric vehicle proponents, and even the California Air Resources Board, brought together by the Los Angeles Cleantech Incubator) has all the makings of one such opportunistic, rent-seeking proposal. The group recently wrote to Congress, urging lawmakers to use the pandemic as a platform to transition the transportation sector to electric vehicles.
The main objectives of the proposal are simple and monstrously expensive: The partnership wants Congress to fund a $150 billion program that would expand the electric vehicle federal tax credit program, subsidize electric vehicle manufacturing, and dump billions of dollars into a nationwide electric vehicle charging network. The proposal also advocates transitioning public transit to electric.
In its letter to Congress, the group claims the program would “help restart our nation’s economy, put Americans back to work, and protect public health.”
If this sounds familiar to you, you’re not alone. In 2009, in the midst of the Great Recession, President Barack Obama and Congress approved a $3 billion program to take older cars off the roads and replace them with more fuel-efficient models. They called it “Cash for Clunkers,” and people received up to $4,500 for trading in eligible clunkers for new models.
Despite its popularity, the program had numerous unintended and negative consequences. By taking perfectly good vehicles off the roads, it shrunk the used vehicle market and drove up prices. Suddenly, low-income individuals found it more difficult to purchase used vehicles at artificially high prices. Experts also found that people who participated in the program purchased cheaper cars than they otherwise would have — a behavioral oversight that wound up hurting the auto industry.
Just like Cash for Clunkers was intended to jump-start the auto industry, Transportation Electrification Partnership’s stated goal is to encourage drivers to go electric. But even with state and federal tax breaks, many electric vehicles are priced out of reach for most people. At an average price of $55,600, a family earning the median household income would spend nearly 90% of its annual income on the average electric vehicle.
Perhaps that is why the Congressional Research Service data show that nearly 80% of those who have benefited from the electric vehicle tax credit program earn $100,000 or more per year. In short, those high-income people who received an overwhelming majority of the electric vehicle tax credits are the ones who need it least. But instead of seeking ways to fix a deeply flawed program, automakers such as Audi, BMW, and Nissan want Congress to expand it so their high-end vehicles can continue to be subsidized by taxpayers.
The bulk of Transportation Electrification Partnership’s proposal, $85 billion, would go toward a nationwide electric vehicle charging network. The group claims the so-called infrastructure “would last dozens of years,” but it’s just as easy to see this technology becoming quickly outdated. Most at-home or at-work chargers can take up to 12 hours to charge some electric vehicles fully, depending on battery size. Direct current fast-charging stations can get the job done quicker, but they cost far more to install. Installing electric vehicle chargers across our nation’s highways and interstates could easily become another government boondoggle when new technology inevitably comes along.
In recent weeks, Congress passed trillions of dollars in stimulus and recovery bills to address the needs of those most harmed by the pandemic. Taxpayers will foot the bill for this recovery for years to come, but these moves were perhaps necessary to keep our economy afloat. What won’t serve taxpayers well at all is spending billions of dollars on unnecessary and unrelated special-interest pet projects under the guise of COVID-19 recovery.
Mark J. Perry is a professor of economics at the Flint campus of the University of Michigan and a scholar at the American Enterprise Institute.
