Cash for Clunkers Plan Could Be Worth $25 Billion

Consulting firm CSM Worldwide released a report saying a thoughtfully designed cash-for-clunkers law could pump as much as $25 billion into the U.S. economy and ratchet up sales by as many as a million cars.

Versions of the proposed legislation, which President Barack Obama mentioned during a speech today about the auto industry, come both from auto-state lawmakers looking to promote domestic sales and from lawmakers hoping to address environmental concerns by getting owners of gas-guzzlers into more fuel-efficient cars.

A compromise bill could work quite nicely because people on both sides of this argument are right and wrong: Some proposals would mandate that people replace their clunkers with new domestic cars in order to receive the cash, while other proposals limit the pool of eligible cars to only the most fuel-efficient models — essentially, hybrids and compact cars.

Any law discriminating against foreign automakers would certainly meet with complaints of trade-law violations, and as CSM points out, allowing buyers to trade in a gas-guzzling SUV for a more fuel-efficient SUV would cut more carbon emissions overall than would a law applicable only to buyers willing to go from a Hummer to a Prius.

Any scrappage plan will help in this depressed auto market, but if Congress gets this legislation right, Detroit, foreign automakers, the economy and the environment could all win.

Lawmakers Inch Toward ‘Cash for Clunkers’ Deal (Detroit News)

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