Economists not enthusiastic about ‘Cash for Clunkers’ program

Economists always seem to rain on everyone’s parade. Politicians, automakers and auto dealers are all banking on the new ‘Cash for Clunkers’ program, hoping that Americans will trade in their old gas-guzzlers for new fuel-efficient vehicles and a $4,500 voucher from the government. On the other hand, economists say that the program is unlikely to contribute much beyond a brief boost to the economic growth in this quarter.

Economists say that the short duration of the program and the eligibility rules are shortcomings of the ‘Cash for Clunkers’ bill.

“It’s a very small number of people that this plan will end up helping,” Wachovia senior economist Mark Vitner told Reuters.

Signed into law on June 24, the Car Allowance Rebate System (CARS), provides $1 billion to be distributed as incentives for those giving up their old gas-guzzlers for fuel-sippers.

Under the program, owners that get 18 mpg or less in combined highway and city mileage can turn their cars in for a cash voucher. If the new car gets at least 4 mpg higher, the voucher would be good for $3,500; a 10 mpg improvement would earn a $4,500 voucher.

– By: Omar Rana

Source: Reuters