"There Ain't No Such Thing As A Free Lunch!"
Many Americans mistakenly believed they were applying for “free money” when submitting a Cash-for-Clunkers application. The federal subsidy program officially known as Car Allowance Rebate System (CARS) granted a $3,500- $4,500 rebate check to people trading in qualified, old cars for a new, environmental-friendly car. The funding aimed to amplify auto sales while replacing gaz-guzzling cars on the road with fuel-efficient ones. According to the New York Times, nearly 700,000 people took advantage of the $3 billion program in July and August — resulting in a 0.4% point increase to the economic growth in the third quarter. The $3 billion funded program ran out in just one month. But we all know if a free lunch sounds too good to be true, we should look closely at the menu — the devil is in the details.

The perceptions of the program’s success are highly subjective, because the sales are chiefly jolted by the exclusivity of the program. An initial budget of $1 billion ran out within the first week of the program’s release, which, viewed as evidence of success, incited Congress to approve an additional $2 billion budget. However, the sales frenzy could have been catalyzed by people postponing earlier plans for their car purchases after learning the rebate program was in the making, because why wouldn’t you want a discount on your new car?

This program was launched for two reasons: to stimulate the economy, which has proven to be a limited success, as some suggested it should have focused on bolstering the United States auto industry instead of allowing replacement foreign cars. Secondly, half of the success in the Cash-for-Clunkers program was intended to lend a hand to the environment by replacing gas-guzzling cars with new cars with high fuel economy. But what good will that do?

Consider the average pre-Cash-for-Clunker Joe. He normally takes the bus to work, hoping to avoid high gas prices. He then learns of the Cash-For-Clunkers program will pay $4,200 (the average rebate) towards a new hybrid to replace his ’92 Volvo. This means people like Joe will actually drive more, albeit a shiny new “green” automobile, rather than leave an old car to sit in the garage. This will put more carbon dioxide into the atmosphere.

The program will not limit pollution by merely replacing the clunkers on the road, but will do the opposite by putting more cars on the road. The environmental solution is to discourage the gas-hogging clunkers from driving with the implementation of a tax, which leaves them the option of either paying the tax, or getting rid of the car. Alternatively, in return for low-income owners turning in their clunkers, offering transit discounted rebates would better encourage environment-friendly habits.
Before the government approved the additional $500 million reimbursement on Sept. 4, dealerships complained about the delays for their rebates. The growing fiasco raised the question of whether they would ever be reimbursed. The Associated Press quoted Cody Lusk, president of the American International Automobile Dealers Association, as saying, “Cash flow is the lifeblood of small businesses. Without it, dealerships can't take care of their day-to-day expenses — like employee pay.”

With no promise for quick reimbursement, similar programs in the future are doomed to fail. One of these programs is already in the works. A so-called Cash-for-Appliances, which will offer rebates on energy-efficient appliances approved by the EPA's Energy Star program.
In retrospect, Cash-for-Clunkers was not as successful as the government made it out to be. In the future, the government should plan their subsidy programs more carefully, or find alternate solutions.