Raising Car Prices for the Poor

I had read a couple of articles positing that by destroying low value cars in the "cash for clunkers program,"  the government was hurting the poor by removing the supply of sub-$5000 used cars from the market.  But what I did not realize is that this program further requires that the engines themselves be rendered useless, so that they cannot be used for parts or rebuilt replacement engines.

The automotive death sentences are meant to ensure that gas-guzzling old models make no return to the road. As sodium silicate disables an entire generation of junkyard-bound cars, the price of used engines will likely skyrocket, predicts Michael Wilson, executive vice president of the Automotive Recyclers Association. "It's the law of supply and demand."

Good plan.  The Journal has a good article about how this sodium silicate process was selected to destroy cars.  I am left wondering if engine parts can even be recycled economically for their metal after the treatment.

  • delurking

    What are the odds that the marketing chief of GM actually wrote "I, like, have so not even ever heard of this before" in an email?

  • JoshK

    This just blew me away when I saw this. The idea of spending money to destroy a $5k car is just unfathomable. It's got to be up there with burning witches.

  • http://threestooges.net Rob

    Until I saw the video of it being destroyed this morning, I had no idea that a 5 year old Volvo sedan could be such a terrible gas-guzzler! Who knew?

    What an absolutely contemptible program. "Compassion for the poor" my ass! The jackals in Washington need to be introduced to some rope and a tall tree.

  • JoshK

    I just can't imagine what the 2b poor people in the world think when they see the US government spending money to destroy these cars...

  • Jamie

    I just ran some numbers on the supposed gas saving portion of this program, and here's what I came up with.

    All of the numbers are from 2007, which would be slightly down for 2008

    http://www.fhwa.dot.gov/policyinformation/statistics/2007/vm1.cfm

    There are 135.9 million passenger vehicles in the US. The average miles travelled is 12,293, and the total fuel consumption for passenger cars is 74,354,839,000 gallons. If you do the math, that works out to 22.47 mpg on a national average.

    Let's assume that all 250,000 cars in the program are "average," and that they are replaced with cars that get 27.5 mpg (5 mpg increase). That's generous, given some of the things I've seen about cars that are eligible.

    So the average "clunker" burns (12,293 / 22.47) = 547 gallons of fuel a year; and the average "efficient car" burns (12,293 / 27.5) = 447 gallons of fuel a year; or a savings of 100 gallons per car.

    So the entire program will save 25,000,000 gallons of gas a year; or .03% of the annual consumption.

    If instead you use the total fuel consumed (for passenger cars, tractor trailers, SUVs and pickups) (176,106,247,000 gallons), then the annual fuel savings is .0142%.

    Or on an economic basis, you are paying $1 billion to save $75m a year in fuel costs. That's a 13 year payback period, even if you assume that those cars will be driven for 13 years.

  • http://www.daublin.org Daublin

    Besides that, wasn't this program supposed to help the environment? Check this out from the linked article:

    "The heat of the operating engine then dehydrates the solution leaving solid sodium silicate distributed throughout the engine's oiled surfaces and moving parts," says the National Highway Traffic Safety Administration publication. "These solids quickly abrade the bearings causing the engine to seize while damaging the moving parts of the engine and coating all of the oil passages."

    The results of this process don't sound all that nice to dump into the environment. The comment about recycling is spot on.

  • http://evilredscandi.blogspot.com Evil Red Scandi

    The Broken Window Fallacy strikes again!

    @Jaime - AFAIK the program requires the cars get 18MPG or less, and the replacements get 20MPG or greater - so it's worse than you think. Other than that, your analysis is spectacular.

  • ArtD0dger

    1/4 oz. disposable foam cup in landfill = crass consumerist culture, environmental armageddon.

    2 tons of automotive steel in junkyard = economic stimulus, environmental salvation.

    Evil Red, don't give them ideas about breaking windows.

  • Michael

    I know auto junk yards don't want these cars. I wonder how much dealers are having to pay to rid themselves of these cars.

  • ben

    Frederic Bastiat wrote on the Broken Window Fallacy in 1850.

    It is almost as if he had this cash for clunkers scheme in mind when he wrote.

  • Nick S.

    22 mpg is "fuel efficient" for a car now? My wife was driving a '79 Bonneville V8 that still got better than 22 mpg in 2001. The car was over 20' long.

    I've never had a car that got less than 27 mpg or so, and none of them were really econoboxes or expensive (and none of them were new).

    I use junkyards for a lot of replacement parts for our vehicles. Thanks a lot for trashing perfectly good cars. ***holes.

  • tribal elder

    If we destroy the clunkers, then poor people and their old cars will stop crowding the roads and get on the light rail trains where they belong.