After the U.S. House of Representatives hastily passed a $2 billion expansion of the "Cash for Clunkers" program last week, the Senate is poised to take up the bill this week.  Luckily for taxpayers, several Senators, including Sens. McCain, McCaskill and DeMint have already voiced their opposition and may look to derail this costly and unwarranted expansion.  ATR and our Center for Fiscal Accountability sent a letter urging Members to refrain from passing the House bill. From our letter: 

This ill-conceived program is costly, and has turned out to be a bureaucratic nightmare.  And make no mistake, even if the first infusion of money came from the “stimulus” package and the replenished funds would come from the TARP program, it is not free money. But even beyond that, a similar program enacted in Germany has seen its cost balloon from an estimated €1.5 billion to €4 billion, and failed to achieve the desired effect of “stimulating” the economy while reducing emissions.

 

In addition, even the underlying logic of increasing fuel efficiency is flawed, as increased fuel efficiency often leads to more driving, which could ultimately lead to more pollution. Further, several studies point to the fact that replacing old cars with new ones in fact increases carbon emissions, as the manufacturing stage is responsible for a large percentage of all toxics released over the life-cycle of a car. Even environmentalist activists like Paul Monbiot from Great Britain oppose “Cash for Clunkers” programs, because in their eyes, “scrappage schemes are nothing but hand-outs for the car firms, resprayed green to fool the incautious buyer.”

The Wall Street Journal also raised a few excellent points earlier today, calling the underlying assumptions of the program "crackpot economics."

On the other hand, this is crackpot economics. The subsidy won’t add to net national wealth, since it merely transfers money to one taxpayer’s pocket from someone else’s, and merely pays that taxpayer to destroy a perfectly serviceable asset in return for something he might have bought anyway. By this logic, everyone should burn the sofa and dining room set and refurnish the homestead every couple of years.

Hopefully  the Senate will reject such "crackpot economics" - but some of the things they have passed recently leave me worried.