NCPA - National Center for Policy Analysis

Ou Est le 'Cash for Clunkers'?

January 10, 2011

Most Americans wouldn't know it, but the Cash for Clunkers model originated in Europe in the mid-1980s.  The idea was two-fold: (1) get high-polluting and fuel-guzzling "clunkers" off the road and (2) stimulate new car sales.  It was called "Prime à la Casse."  Over the years, European governments with large national production (Germany, Italy, Spain, the United Kingdom) implemented similar programs, and even states with little if any production (Luxembourg, Ireland) joined in, says Victor Dial, former chairman and general manager of Ford France.

When the Cash for Clunkers program started in America in 2009, Dial admits he was surprised at the almost immediate outcry from economists, pundits and, yes, citizens, denouncing it as wasteful.  They were, of course, right:  It pulls forward new car sales, but it also scraps perfectly good, serviceable vehicles, thus lowering supply and driving up used-car prices, says Dial.

  • In the United States, the predicted volume was underestimated, the budget was woefully inadequate, and the government was unable to process payments in a timely manner.
  • Cash for Clunkers quickly became a synonym for government overreach and incompetence.

In Europe, few question government intervention in industry or hold government accountable.  In the United States, as the Tea Party has shown, even if government does not care about accountability, the citizenry does.  And to that Dial says, Vive la différence!

Source: Victor Dial, "Ou Est le 'Cash for Clunkers'?" Wall Street Journal, January 7, 2011.

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