The Obama administration's $787 billion stimulus plan is having little or no effect in prodding the U.S. economy out of the recession. The country's unemployment rate remains near 10 percent. As a result, Americans are frustrated, and businesses are uncertain about the future.
So it's time for Washington to jump-start the economy using something that works, namely another cash-for-clunkers program. The original program gave a consumer up to $4,500 in rebates on a new vehicle if the trade-in and new purchase met certain requirements. It ran only from July 27 through Aug. 25, 2009, and was funded for only $3 billion.
Yet a study by Maritz Automotive Research Group says the program created 765,000 incremental sales: 542,000 units directly funded by the program and another 223,000 "halo" vehicles bought by consumers who went to a dealership intending to participate, didn't qualify but bought or leased a new vehicle anyway.
Even better, the Maritz study shows that cash for clunkers boosted sales without a negative pull-ahead effect on future sales as some critics had feared.
The Maritz study confirms anecdotal reports from dealers across the country. AutoNation CEO Mike Jackson called it a "fantastic stimulus program." But it isn't only dealers who appreciated the power of cash for clunkers.
Speaking at the Automotive News World Congress in January, Wilbur Ross, chairman of the supplier group International Automotive Components, said the cash-for-clunkers program was feeble and poorly administered compared with a similar program in China, which had a budget of $14.8 billion.
Nonetheless, Ross said he would love to see another cash-for-clunkers program in the United States as soon as possible.
A new program should be better funded, paying out perhaps as much as $15 billion. It also should include more vehicles, run longer and have fewer strings attached. And since the government has experience administering cash for clunkers, the logistical problems that early-on plagued the first program would be avoided.
Some may complain that using tax dollars to stimulate new-vehicle sales is inappropriate. But a new cash-for-clunkers program would be a strong investment in the economy, stimulating manufacturing activity and -- through the nation's dealerships -- boosting economic activity in American communities large and small.
Cash for clunkers would help drive an economic recovery.