More on C4C (Updated)

Following up on my post yesterday in opposition to the Cash for Clunkers program, several additional items have emerged that I think are of interest. First, via Kevin Drum, here’s the list of cars purchased most frequently under the program:

1. Ford Focus
2. Honda Civic
3. Toyota Corolla
4. Toyota Prius
5. Ford Escape
6. Toyota Camry
7. Dodge Caliber
8. Hyundai Elantra
9. Honda Fit
10. Chevy Cobalt

which would seem to refute the notion that this program gives a leg-up to our new federal assets, GM and Chrysler. BTW, I can’t tell you how many times over the last few days, as I predicted, I’ve heard the argument that we should be doubling down on our commitment to Chrysler and GM because of our prior commitment. Forsooth! Have they never heard of cutting one’s losses?

However, it is rather clearly a shot in the arm for Japan and South Korea. I’m not 100% certain where the Duratec engines that Focuses use are built—I’m guessing Japan. But I have little doubt that there are lots and lots of parts manufactured in Japan and South Korea in the cars in that list.

Also, Justin Fox, in an illuminating article on the economics of C4C mentions an unforeseen and, I think, undesireable secondary effect of the program:

In a new paper, economists Lucas Davis and Matthew Kahn describe how the North American Free Trade agreement has enabled big-time exports of used cars from the U.S. to Mexico. This export flow has improved the gas mileage and emission standards of the Mexican automotive fleet—but because it has enabled Mexicans to keep driving cars that in the U.S. would have been scrapped, Davis and Kahn estimate that it has increased overall emissions. A cash for clunkers program would slow the export flow to Mexico, thus reducing at least that particular source of auto emissions (while also depriving some Mexicans of cars, of course).

I’m not sure what the net environmental impact of that would be. On the one hand the program will marginally increase the auto emissions from the Mexican fleet but on the other we wouldn’t be transporting all those cars from the U. S. to Mexico. I’m guessing that this factoid suggests a net negative impact for C4C but, as I say, I’m not really sure.

I don’t think that Senators and Representatives are the ideal people to be considering the complex secondary effects of this kind of policy, indeed, IMO they are by inclination and training incapable of doing so. That’s why I have a predisposition to be mistrustful of this kind of micromanaging by Congress, especially when the objectives of the program haven’t been clearly thought out and the secondary effects are likely to be so extensive.

Update

Derek Thompson critiques Cash for Clunkers as fiscal stimulus. I think that’s about right.