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Looking Back at Cash For Clunkers - Obama Plan

August 2009

Cash for Clunker - Obama Stimulus Program

The phrase "Cash For Clunkers" has been all over the media as of late and for good reason. Cash For Clunkers is thus far the most successful economic stimulus program, this notion is impressive by any measure but is even more impressive when you take in the fact that it makes up less then 1% of the stimulus budget. Not to mention that this figure was increased three fold from the original 1 billion dollar budget to 3 billion which was passed by congress due to the overwhelming success.


What is the Cash For Clunkers Program?

The Cash For Clunkers Program is a Consumer spending and automotive industry stimulus program that awards consumers with a substantial rebate in the amount of 3,500-4,500 dollars for meeting the following:

The consumer must trade in a "clunker" which is a term to describe a older automobile that gets poor gas mileage. Clunkers get 18 or less miles to the gallon.

The consumer must then purchase a new car that is fuel efficient and at least 4 miles to the gallon more efficient then the clunker traded in. The Incentive or amount of the rebate awarded is much higher for a car that is 10 miles to the gallon more efficient then the clunker traded in.

• 3500 dollars is awarded for a four mile improvement.
• 4500 dollars is awarded for a 10 mile improvement.                  

As mentioned in the beginning of this article the Cash For Clunkers Program performed much better then expected which was the catalyst behind congress's decision to triple the budget. Taking a look at the financial numbers describing the economic activity makes the popularity of the Obama stimulus program quite evident.

Resulting Economic Activity of the Cash For Clunkers Program

• Approximately 700,000 - 750,000 Transactions or new car purchases
• Approximately 20 billion dollars in sales

Benefits of the Cash For Clunkers Program

Economic Activity surged and more importantly then how much is where. Consumer spending as well as the automobile sales were two of the most troubled aspects of the recession and these were the beneficiaries of Obama's Cash For Clunkers Program.

Consumer Value

The Cash For Clunkers Program allowed the consumer participants to obtain substantial value per dollar.

Environmental Implications

This program will obviously help the environment because of the programs focus on fuel efficiency.

Gas Prices

The cost of fuel or gas will inherit downward pressure because of the quarter million clunkers that have been taken off the road and replaced with a more fuel efficient counter part.

Jobs and employment

This program will obviously help improve the employment numbers given the increased consumer spending.

Credit and Lending Activity

These new automobile purchases gave an upward push to lending activity, as consumers took on secured debt to finance these purchases.

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