Half-Cash for Clunkers

The US Government started this program called “Cash for Clunkers“.  It gives $4000 to anyone who is trading in an old piece of crap for a new shiny car.  The goal is to increase the overall gas efficiency as well as spur the automotive industry.  They allocated $2 billion dollars.  The money ran out in a few weeks, so they allocated a few more billion.  Now it’s gone.

Here is my question:  When they funded the second round, why didn’t they change it from $4000 to $2000.  If $4000 was enough of an incentive to get people to buy a new car, maybe $2000 would work too, and for twice as many cars?  What about $1000?  Why didn’t they experiment?  It was a golden opportunity to understand the levels of incentive that people react to and they blew it.

I have a feeling that $2000 would have worked just as well and doubled the effectiveness of the program.  Generally speaking, this kind of program should exist ALL the time, even as low as $500 or $1000 per car.  The more we can change the profile of our gas usage, the better.  It’s absolutely worth the money when you consider how much we spend on military fighting in these oil rich nations.

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