There is even more proof out this week that President Barack Obama’s 2009 “Cash for Clunkers” stimulus program did not strengthen the economy and, in fact, could have actually slowed growth.
A working paper on the topic, titled “Cash for Corollas: When Stimulus Reduces Spending,” was released Monday by the National Bureau of Economic Research and outlined on FiveThirtyEight. In it, authors Mark Hoekstra, Steven L. Puller, and Jeremy West found that the stimulus program actually reducing consumer spending because the tough fuel-efficiency rules led buyers to choose cheaper cars.
The “Cash for Clunkers” program planned for Congress to spend about $2.85 billion to have drivers to swap their older gas-guzzlers for newer and more fuel-efficient cars. It’s purpose was two-fold: boost the economy and the automotive industry, and to help the environment.
Using data from Texas, the researchers discovered that program only boosted car spending briefly, encouraging people to buy cars slightly earlier than they had originally planned to. But the restrictions on the subsidies that only allowed drivers to buy cars that met certain minimum fuel-efficiency standards, meant that people bought smaller cars and spent less.
Drivers that took advantage of the program spent about $4,600 less on average than they would have without the program, the study found.
While critics are quick to point out that Monday’s study is still preliminary and has not yet been peer-reviewed, this is not the first study to find that the “Cash for Clunkers” program did more harm than good.
In 2013, an analysis from the Brookings Institute found that it wasn’t an effective stimulus and while it did lower greenhouse gas emissions slightly, this change came at a high cost.
The Brookings study estimated that the “Cash for Clunkers” program pulled vehicle sales forward and likely boosted GDP by about $2 billion and created around 2,050 jobs. This means the program cost about $1.4 million per job created.
It also found that the program cut carbon-dioxide emissions by between 8.58 million tons to 28.3 million tons — about three days’ worth of U.S. oil consumption. The study pointed out that it cost between $91 and $301 per ton of carbon avoided.
By any measure, almost any other stimulus package would have been better.
