Marketplace Scratch Pad

Cash for Clunkers

Scott Jagow Jun 9, 2009

The House is expected to take a floor vote today on the bill that would give people vouchers for trading in low mpg cars and trucks for ones with better fuel efficiency. The biggest criticism of the House bill is that it only requires the new cars to have slightly better fuel efficiency.

From AP, emphasis mine:

Under the House bill, car owners could get a voucher worth $3,500 if they traded in a vehicle getting 18 miles per gallon or less for one getting at least 22 miles per gallon. The value of the voucher would grow to $4,500 if the mileage of the new car is 10 mpg higher than the old vehicle…

Owners of sport utility vehicles, pickup trucks or minivans that get 18 mpg or less could receive a voucher for $3,500 if their new truck or SUV is at least 2 mpg higher than their old vehicle. The voucher would increase to $4,500 if the mileage of the new truck or SUV is at least 5 mpg higher than the older vehicle.

$3,500 for 2 mpg better? The way this thing is packaged, it doesn’t even give the appearance of being about better fuel mileage. It simply shouts — car sales need a boost!

A group of senators, led by California’s Diane Feinstein, are offering a competing plan:

They complained that even a 2009 Hummer H3T, which gets 14 mpg in city driving and 18 mpg on the highway, could qualify for the incentives under the House bill.

Under Feinstein’s plan, a passenger car owner’s trade-in would need to get 17 mpg or less to qualify and only new passenger cars getting at least 24 mpg would be eligible. Owners could receive a $2,500 voucher for a new car that gets at least 7 mpg more than their old car. The voucher would increase to $3,500 for new cars with a 10 mpg improvement and $4,500 for new cars with a 13 mpg increase in fuel efficiency.

You can read more details at Feinstein’s website. Feinstein’s bill would also allow people to use their voucher for public transit fares. After all, it’d be a shame to encourage people to bump up their fuel efficiency by 2 mpg but give no incentive to people who are giving up driving altogether.

What’s your take on this idea?

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