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 # 587  

October 2009

 

Cap and Trade Bill Contains a New "Cash for Clunkers" Program Covering Consumer Products


by Justin Danhof

 

The Wall Street Journal has sarcastically suggested that "Cash for Clunkers" be extended to "subsidize the purchase of kitchen appliances... and new fishing boats," arguing that such items "are hardly less deserving than cars."1

Be careful what you wish for. 

The U.S. House has approved legislation that would offer rebates to consumers for replacing old dishwashers, refrigerators, ovens, washing machines, hair dryers, and yes – even toasters.  Could fishing boats be far behind?

The purpose of the $3 billion federal Cash for Clunkers program ostensibly was to retire less fuel efficient vehicles and spur additional car sales by offering taxpayer-funded rebates of $3,500-$4,500 to car owners trading in vehicles getting 18 mpg or less for those getting as little as four extra miles per gallon.

After its initial outlay for the program was spent within days, Congress voted for a clunker refill, although a Rasmussen poll showed 54 percent of Americans opposed more tax dollars for this program.2 

Many liberals believed Cash for Clunkers did too little to curb carbon emissions, while many conservatives considered it another example of the government picking winners and losers and bailing out industry. 

Both expressed concern that this Obama Administration brainchild is harmful to charities and the poor.  As columnist Elizabeth Hovde explained, "[t]hese working-condition vehicles could have gone to used car lots, available to people who can't afford new cars.  Or they might have found their way to charitable organizations or relatives in need."3 

Despite what the American people think, Congress loves the clunker fiasco so much it may now extend the program to every motorized vehicle and electrical appliance in America.

Buried in the Waxman-Markey cap-and-trade bill, which the House approved in June (and a version of which is pending in the Senate), is the "Smart Appliance Rebate Program."4   This applies the Cash for Clunkers concept to any product that the Administrator of the EPA or the Secretary of Energy deems worthy. 

Don't like your old 20-inch black and white television?  Trade it in and have your neighbor subsidize your new 52-inch flat-screen plasma!

This Waxman-Markey program would have an annual budget of $100 million.  That is, until there is a run on new efficient flat-screen televisions, hot tubs and blenders, or whatever appliances these unelected officials deem worthy, thereby "forcing" Congress to triple the funding. 

The Congressional Budget Office estimates that Waxman-Markey would cost $846 billion.5  Perhaps that projection should be ratcheted up in light of the Cash for Clunkers melee. 

The stated purpose of the Waxman-Markey legislation is to reduce energy use, and thereby, carbon emissions.  However, the Smart Appliance Rebate Program might increase energy use and emissions. 

"These types of programs generally fail cost-benefit analyses spectacularly," Stephen Spruiell and Kevin Williamson explained in National Review, "because more energy goes into the production of the new appliances than would have been used if the old ones had just run their course."6

Under Cash for Clunkers, the government drastically overpaid for carbon reduction.  In Slate, Nina Shen Rastogi calculated that if each consumer keeps their new "efficient" car for ten years the total carbon savings would be about 5.7 million tons at a cost of $175.53 per ton.7

A ton of carbon currently goes for about $20 on the European Climate Exchange. 

Congress doesn't mind; it's only taxpayer money it is wasting. 

But I'm sure Congress won't make the same mistakes with Waxman-Markey's Smart Appliance Rebate Program, aren't you? 

Justin Danhof is a Research Associate with the Washington, D.C.-based National Center for Public Policy Research.



Footnotes:

1 "Cash From Clunkers," Wall Street Journal, August 2, 2009, available at http://online.wsj.com/article/SB10001424052970204313604574326531645819464.html as of August 7, 2009.

2 "54% Oppose More Money for 'Cash for Clunkers' Program," Rasmussen Reports, August 4, 2009, available at http://www.rasmussenreports.com/public_content/business/auto_industry/august_2009/
54_oppose_more_money_for_cash_for_clunkers_program
as of August 6, 2009. 

3 Elizabeth Hovde, "'Cash for Clunkers' Breaking Down, But Not Before Hurting Lower-Income Buyers, Auto Recyclers," the Oregonian, July 31, 2009, available at http://www.oregonlive.com/hovde/index.ssf/2009/07/cash_for_clunkers_breaking_dow.html as of August 6, 2009. 

4 Section 146; H.R. 2454 American Clean Energy and Security Act of 2009.

5 "Congressional Budget Office Cost Estimate:  H.R. 2454 American Clean Energy and Security Act of 2009," June 5, 2009, available at http://www.cbo.gov/ftpdocs/102xx/doc10262/hr2454.pdf as of August 6, 2009.

6 Stephen Spruiell & Kevin Williamson, "A Garden of Piggish Delights," National Review Online, July 2, 2009, available at http://article.nationalreview.com/?q=YTc1MmVhMGYxY2UzNzAwMTJlODBjZjg2NDJjNmM2MWE=&w=MA as of August 6, 2009.

7 Nina Shen Rastogi, "Carbon for Clunkers," Slate, August 4, 2009, available at http://www.slate.com/id/2224306/ as of August 7, 2009.


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