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People Are Afraid Cash-for-Clunkers Will Be Too Successful?

President Obama is pushing a compromise cash-for-clunkers program that will bridge the gap between two competing bills and provide a sliding incentives scale, whereby drivers will receive a cash voucher for trading in their old cars for more fuel-efficient ones — the greater the increase in efficiency, the more valuable the voucher.

Yet the plan has come under some criticism, the basic thrust of which appears to be that it might be too successful.

Some environmentalists have argued that by spurring new car production, it could actually lead to higher carbon emissions, rather than reducing emissions as intended, since 10 to 20 percent of a car’s lifetime emissions come from its manufacturing. Still, with Detroit on its knees and many thousands of Americans out of work, few would argue that stimulating the auto industry would be a bad thing, particularly if it’s producing more fuel-efficient vehicles. There may be merit to this line of reasoning, but it’ll never fly in Congress or with the public at large.

Other critics point to the example of Germany, where a similar cash-for-clunkers program was so popular (car sales rose 11.9 percent in February, as they fell just about everywhere else in the world) that it cost the government three times the anticipated price tag. Sure, Berlin might have to scrounge a bit to come up with the extra 3 billion euros (roughly $4 billion). But if we can turn around Detroit with just a few billion dollars, none but the fiercest deficit hawks will complain — particularly when we’ve already spent over $17 billion trying to do just that, and could end up shelling out as much as $130 billion.

Now, there are some legitimate causes for concern, such as the potential impact of cash-for-clunkers on used car dealerships. Still, with the auto industry in such perilous straits, it’s hard to turn down the prospect of a program that can simultaneously encourage fuel efficiency and improve the long-term health of Detroit.

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