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Brookings analysts recommend against repeating cash for clunkers program in future recession

According to a new paper and policy brief by Brookings, the Car Allowance Rebate System (CARS) or “cash for clunkers” program, launched during the height of the recession with the intention of stimulating the economy and reducing emissions, actually resulted in only a small and short-lived impact on GDP; a higher implied cost per job created than alternative fiscal stimulus programs; and a higher cost per ton of CO2 reduced than what would be achieved through a policy such as a carbon tax or cap-and-trade.

However, the cost of CO2 reduced was comparable or lower than that achieved through less cost-effective policies such as the tax subsidy for electric vehicles, the analysis concluded. In terms of distributional effects, compared to households that purchased a new or used vehicle in 2009 without a voucher, CARS program participants had a higher before-tax income, were older, more likely to be white, more likely to own a home, and more likely to have a high-school and a college degree.

Cost per job created. Click to enlarge.   Cost per ton of carbon reduced. Click to enlarge.

The CARS program, administered by the National Highway Traffic Safety Administration (NHTSA), allowed consumers to trade in an older, less fuel-efficient vehicle for a voucher for either $3,500 or $4,500 (depending on the delta in fuel economy between the trade-in and the new vehicle) to be applied toward the purchase of the newer, more fuel-efficient vehicle. After the “clunker” was traded in, its engine was destroyed. 677,842 clunkers were traded in between 1 July 2009 and 24 August 2009 as part of the program, which issued $2.85 billion in vouchers; NHTSA concluded that the new vehicles purchased under the program averaged 24.9 miles per gallon (9.4 l/100 km), compared to the 15.8 mpg (14.9 l/100 km) averaged by the trade-in vehicles.

Based on an evaluation of the various aspects of the program, from numbers of vehicles traded-in to impact on GDP, cost per job, environmental impact and the types of consumers who took advantage of the program, Ted Gayer, Co-director of Economic Studies at Brookings and Research Assistant Emily Parker found that:

  • The $2.85-billion program provided a short-term boost in vehicle sales; however, some of these sales were pulled forward (or borrowed) from sales that would have occurred in the future in the absence of the program. The net result was a negligible increase in GDP, shifting roughly $2 billion into the third quarter of 2009 from the subsequent two quarters.

  • The small increase in employment came at a far higher implied cost per job created ($1.4 million, or 0.7 jobs for each million dollars of program costs) than other fiscal stimulus programs, such as increasing unemployment aid, reducing employers’ and employees' payroll taxes, or allowing the expensing of investment costs.

  • The program resulted in a reduction of carbon dioxide emissions of only 8.58 to 28.28 million tons.

  • The program resulted in a small gasoline consumption reduction of 884 to 2,916 million gallons—equivalent to about only 2 to 8 days’ worth of current usage.

In the event of a future economic recession, we would not recommend repeating the CARS program. While the program did accomplish both of its goals of stimulating the automobile market and decreasing carbon emissions, there are more cost effective policy proposals to achieve these objectives.

—Gayer and Parker brief



Roger Pham

Agree with you on the last 1/2 of your last posting. There should be more campaign for more nationalistic fervor. Campaign to get people to work together for the future stability and prosperity of our country, and our environment. Neither party has the solution as of now.

I also agree with you regarding universal health care coverage for all citizens, on the same moral principle that no citizen should be left hungry or shivering. However, I disagree with the approach of ACA that will bankrupt this country if not modified or repealed in time! I believe that the solution for the curren health care crisis lies in the use of Free-Market Approach to Health Care.

I'd like to name this PhamaCare, for obvious reason, as opposed to ObamaCare! People should have their own health care budget in the form of both a Health Saving Account (HSA) backed up by a Health Credit Account (HCA) with a credit limit. Both are set up and administered by the States but are totally voluntary. The more one contributes to one's HSA, the higher one's credit limit will be on one's HCA, so there is the incentive to contribute as much as one can afford to one's HSA in order to raise the credit limit.

The States also set up ways for people to check on the cost-effectiveness of their health care providers online based on the billing pattern and ratings of patients. The technology for this is already mastered by Google, Bing, etc. When people spend their own money and have ways to check to see which Dr., Hosp. or Clinic is the most cost-effective for their condition, health care cost will plummet to 1/2-1/3 of it costs today.

For increasing the individual health care budget, people can join in groups of 50-100 to form a Risk-Sharing Pool, in which if one's health budget is already exhausted, each person can tap into 5%-10% of the budget of other member in the pool. For example, a group of 100 persons in which the average HSA + HCA of each person = $20,000; with access to up to 10% of the rest of the member's budget, can have access to 10% of $2,000,000, which is $200,000 of additional coverage, which is enough for even organ transplant etc...With PhamaCare allowing health care cost to drop to 1/2-1/3 of what it costs now, the gov. then can subsidize the poors without risking gov. bankruptcy!

You imagine that instead of the gov. giving the poors Food Stamps, the gov. will pay all the food bills for the poors without limit...Imagine how much the gov. will have to pay the poors for foods? Poor People will feast on Caviar, Lobsters and Cognac and Heneken just like the Rich who pay their own ways etc... while the gov. will bankruupt with the food bills. This is what essentially what ACA is mandating now: Unlimited health care coverage/subsidization from the gov. so the poor & rich all will have the same coverage!!!

There you have it! Instead of 2,700 pages of ObamaCare, you have 3 paragraphs describing PhamaCare that is patterned after proven Free-Market principles of individual budgeting and free competition that is guaranteed to work! All former Communist countries that introduced Free-Market principles to their economy have seen economic growth and prosperity! ...While America plunges into Communism!!!

Bob Wallace

"I disagree with the approach of ACA that will bankrupt this country if not modified or repealed in time! "

In a few words, describe how the ACA will bankrupt America.

And explain how the Congressional Budget Office erred in their finding that the ACA saves money.

"The Affordable Care Act includes a number of coverage and other provisions that will require more government spending, but these costs are offset by other ACA provisions that will either bring new revenue into the government, or decrease current spending.

In total, the ACA is expected to reduce budget deficits by $210 billion over 2012-2021, according to the Congressional Budget Office’s estimates in February 2011.

This includes $1,390 billion in gross costs related to the ACA’s insurance coverage provisions, offset by $349 billion in coverage-related revenues and savings (including minimum coverage provision penalty payments), and $1,252 billion in other revenues and savings."

"Although in its July 2012 numbers, the CBO did not update its projection of the ACA’s overall reduction of the budget deficit, it did update a previous estimate of the potential cost of repealing the ACA.

(The) CBO now estimates that repealing the ACA would increase federal budget deficits by $109 billion over the 2013–2022 period. Repealing the coverage provisions would save $1,171 billion over that period, but repealing the rest of the act would increase direct spending and reduce revenues by a total of $1,280 billion."


Since the last CBO review it has been observed that premiums are coming in lower than expected earlier. This further increases the savings created by the ACA and further lowers the budget deficit helping us to sooner start reducing the national debt.

Bob Wallace

Let me point out, Roger, that Obamacare leverages the free market, the insurance market, to provide good quality, affordable health insurance for all those who do not qualify for a government health insurance program.

The first thing that the ACA does is to establish a level playing field. It specifies the services and treatments that must be covered, eliminates annual and lifetime caps, and halts cherry-picking of the healthiest.

Now we don't get screwed by a predatory company selling us a faulty product and leaving us to face bankruptcy if we encounter large health bills.

It sets limits on how much of the collected premiums insurance companies can pocket which eliminates their ability to shortchange treatment in search of higher profits.

Then it makes all the plans available on a single page so that we can easily comparison shop.

Now the free market can take over an run with it.

Insurance companies can't make more money by kicking off the sick or refusing to treat clients as had been the case. They will make more money by selling more policies and keeping their operating costs low.

The way an insurance company will be able to grow its profits is by making their customers very, very happy. They do that and more people will switch over and do business with them. Increased profits will come from increased volume sales.

A very clever use of market forces to deliver affordable, high quality health insurance if you ask me.

Bob Wallace

" Unlimited health care coverage/subsidization from the gov. so the poor & rich all will have the same coverage!!!"

I understand, Roger. The poors who flip our burgers, mow our yards, stock our Walmart shelves and clean our offices should not get good healthcare because they are poor.

Doesn't matter if they are poor because they weren't lucky enough to be born a white male or born into an affluent, educated family. Or if they just are a bit below average intelligence.

Even if they are working multiple jobs and struggling to provide for their families they're poor and they should pay a price for being poor.

Even if they are working hard, full time for an employer who doesn't pay fairly or provide health care they should suffer because they are poor.

I suppose you don't recall when desktop computers made an impact on American businesses and a lot of middle management people lost their jobs. Many ended up with crappy jobs like security guards after pulling down nice five figure salaries. Or the typesetters, newspaper reporters and other good solid middle class people who were tossed away as technology replaced them. People who were living the same sort of life you now live, Roger.

They should now suffer because they're now poors....

Roger Pham

So, you share the enthusiasm of Marx, Engel, Lenin, Stalin etc. after the Revolution. The ideal is great: You contribute to the system what ever you want, and get out of the system as much as you want! Collectivism like in collective farming failed miserably. When people don't own their own farm or business, they have little incentive to be productive. When the people has insurance, they have little incentive to shop around for values. Doctors and hospitals don't try to be cost-effective when their patients don't care about it. Drs who order a lot of expensive test and drugs can see patients faster with less thinking involved, while patients wants a lot of expensive tests done because they don't have to pay for them and they want to get their maximum health benefits.

This is why the gov. gives out Food Stamps and Welfare Checks with defined amounts so people can budget their purchase, instead of allowing people to buy food all they want and then send to bill to the gov. That's how to feed and house people on a budgetary constraint. BTW, the gov. has just voted to cut $5B off of Food Stamp budget to help ease the deficit.

How much the poors can be helped will be dependent on the gov. budget. The open-ended mandate of ACA is what will bankrupt this country, unless Congress will wisely modify it to limit subsidization of the poors depending on the gov. budget.

Bob Wallace

"The open-ended mandate of ACA is what will bankrupt this country"

Roger, the Congressional Budget Office found exactly the opposite. If you believe them wrong then you must show where they made the error in their math.

If you knew something about the ACA you would know that there are built in cost controls. You really are poorly informed about this law and are making judgements out of ignorance. Spend a little time and read up on it. Here's a very good summary -


(And lighten up on that Commie stuff. It makes you look like a crackpot.)

Roger Pham


The CBO are politically motivated and are not to be trusted. Look at what kind of budget deficit mess we're in right now in the last 5 years, with no end in sight! Has any of the CBO's prediction came true?

I've studied very carefully the ACA since its early conception to now, and I don't see how this vast expansion of health care benefits to millions of additional people and millions of the uninsurable can save money! Please kindly advise me of what cost control measures can help reduce health care cost.

You're accusing me of not knowing ACA well, but before developing my PhamaCare Concept, I've actually spent many many nights reading over and over again its major provisions and reading many official interpretations of it and still don't see that the ACA concept can add up! Thanks for providing me the link above, but I've actually read over that already, for quite sometimes. I've just finished reading over it again, and still don't see what you're talking about.

Thank you in advance for your kind assistance and continual instruction in this matter. I would to beg you also to give me some feedback as to the potential problems and pitfalls with my PhamaCare Concept, so that I can refine it to make it more acceptable to the public.

Bob Wallace

Roger, the CBO is a non-partisan agency tasked with producing the most objective analysis possible.

Obviously you did not bother to read the link to ACA provisions I gave you. The cost savings provisions are spelled out in very simple English on that page.

You obviously haven't read the the major provisions of the ACA as you claim to have. Otherwise you would not be asking what the cost savings measures are.

How about this - you read the provisions of the ACA in this link -


Then get back to me with a list of cost savings measures so that I know that we're working with the same information base and then I'll take a careful look at your plan.

That fair?

Roger Pham

The "Cost Containment" section of the ACA mentioned the following:

Administrative Simplification:
(Really? The real-life truth is providers and companies have to hire extra experts to help in the interpretation and compliance with the very complex ACA!!! Expect higher administrative cost)

Medicare (MCare) & Medicaid (MCaid)
(More micro-management and red tapes and ideas that have been tried before and failed! The painful truth is that for the last 4 or 5 decades, it has been like a cat-and-mouse game between Insurance & MCare & MCaid and HealthCare Providers in term of cost control! DRG was tried (Diagnosis Related Group), Bundled Payment, Deductibles, Co-pay, Denial of payments for every tiny technical reason, etc...) but health care cost ballooned to frightening level several folds higher than inflation. A significant portion (1/3-1/2) of overhead expenses of a medical practice group is in fighting with Third-Party Payers for payment, claim denial, claim re-submission, arbitration, contract negotiaton etc...This is a dirty truth not often mentioned by the mass media nor aware by the public. Every year, Congress plan to cut Medicare & MCaid re-embursement...Then Drs and Hosp fought back...Congress relented...delay...MCaid reimbursement rates are so low that most MCaid recipients have hard time finding a family Dr. forget about seeing a Private Specialist...Yet, the MCaid costs are busting most States' budgets...and, Oh yeah, ACA wanna expand MCaid even further! Outrageous and out of touch w/ reality!
ACO: Accountable Care Organization...This is a new concept, but with so much redtapes and complexity that the output data can be gamed and in the end, won't amount to much.

Prescription Drugs: "Authorize the Food and Drug Administration to approve generic versions of biologic drugs and grant biologics manufacturers 12 years of exclusive use before generics can be developed." Biologic drugs are a very limited class of drugs that involves vaccines and limited used stuffs such as Interferon, Growth factors, Epogen, DDAvp, etc. Biologics require high level of technology to make, such that even generics won't save much cost and with very questionable quality. Even simple stuffs such as levothyroxine from many generic makers simple does not work! Many generics from third-world countries do not work! This is a very sad fact!

Waste & Fraud&Abuse Reduction:
(On-going effort with mixed success. MCare already reward informants of MCare fraud with significant portion of recovered fraud money to encourage snitching. Nothing new here. Already existing practice is the practice of claim data mining by MCare&MCaid&Ins to spot out providers who claims at abnormally higher service level than others in order to do audit... Nothing new here...Yet, Health Cost is still ballooning....

Sorry, Bob, but I haven't seen any idea here that will cut cost of health care. Most ideas here have been tried and failed.

Now, it's your turn, Bob

Roger Pham

I've already posted my comment on the list of cost containments of ACA. Yet, it has not shown up yet. Still awaiting censorship of TP to approve it.

Bob Wallace

Well, you seem to have somewhat read the provisions of the ACA. Then you apparently decided that none of them will work. The Congressional Budget Office has determined that they will. So I guess we are left with the choice of who we most trust to do the math, you or the CBO.

Now, your plan.

"People should have their own health care budget in the form of both a Health Saving Account (HSA) backed up by a Health Credit Account (HCA) with a credit limit."

"For increasing the individual health care budget, people can join in groups of 50-100 to form a Risk-Sharing Pool, in which if one's health budget is already exhausted, each person can tap into 5%-10% of the budget of other member in the pool."

What you are describing is a voluntary insurance co-op. Those are options under the ACA. Available in any state where people want to set them up.

I don't really see much of a thought out system, just a broad idea.

What happens if your 100 member group has a large number of young people who have not yet built up a lot of savings and multiple people have large medical expenses?

There are multiple ways one can pile up a million dollar medical bill. Dick Cheney's heart replacement cost over $1 million. A heart-lung replacement runs about $1.2 million. Get two of those in your pool and there's no money for anyone else to get sick.

Smart insurance plans spread risk over thousands and thousands of people.

I assume there's no requirement that people purchase insurance or pay into their medical savings account under your plan? We tried that approach for a couple hundred years and it just didn't work. Far too many people won't pay in voluntarily. Look at how few invest/save for retirement until the last few years.

How does someone working 25 hours a week at Walmart and 25 hours at McDonalds afford to feed their family and build up a $20,000 medical savings account? For a family of three that would be $60,000. Over three years salary.

I don't see your plan being workable Roger. A few people who have disposable income would join and save. Most people either wouldn't or wouldn't have the money.

Now for some reason you have come to believe that the ACA will bankrupt America.

Do you not realize that we are already treating "the poors" in our emergency room which is a very expensive route? That we are driving our health insurance premiums higher because we've gone that route?

Sending someone to the local health clinic to treat their flu, cut finger, whatever is a huge cost saver for insurance purchasers and taxpayers.

BTW, "the poors" is kind of a nasty way to refer to our fellow citizens. Remember, you're only one bad luck event from being one of them.

Roger Pham

Thank you for your feedback, Bob.

Good point that you recognize that these HSA + HCA plans when administered by the States, may qualify under ACA. In fact, PhamaCare can exist under ObamaCare and need to cover only a percentage of people. This is because it only takes certain minimal percentage of citizens under PhamaCare to start to motivate the Drs and Hosp to be cost effective, and to compete on cost effectiveness. This will drive down the cost of health care overall by allowing Health Ins and MCare and Mcaid to lower re-embursement rates. So, in the end, everybody will benefit when there is at least a significant segment of the health care market is under Free-Market Competition.

Of course, at the start of PhamaCare, there won't be enough time to build up enough of a Health Saving Account. For this reason, I also proposed a Health Credit account sponsored by the States, with variable Credit Limits, just like what offered by Credit Cards. One of my Credit Card has a Credit limit of $25,000. The more one contributes to the HSA per pay period, the higher the Credit Limit will be. For example, if an individual contributes $400/monnth to his HSA, his Credit Limit may be around $20,000. If he contributes only $200/month, then his Credit Limit may be only $10,000, by example (Actual numbers may vary). People who owe money to the States on their HCA (Health Credit Account) will have a small percentage of deduction from their monthly paycheck to payback on their HCA and can't contribute money to their HSA until their HCA is fully paid off.

The Gov. may subsidize the monthly HSA contribution of those with income below 400% of poverty level, just like under the ACA w/ ins exchanges, on a sliding scale. So, we still have essentially Universal Coverage under PhamaCare. The difference is that now that people have to pay for health care with their own money, they will be cost-conscious and will look for ways to save on health care cost.
Thus, health care cost will drop to 1/2 to 1/3 of today's cost for a given procedure or consultation. This means that a transplant procedure formely cost nearly a million USD will eventually cost only $300k. Overseas, the same procedures cost 1/2 to 1/10 of the cost here in the USA, because people pay out of their pocket for health care. Lapband procedure for wt. loss used to cost $15,000 or equivalent to $20,000 of today's value, now can be done for $8,000-9,000. Same for other cosmetic procedures not covered by insurance nor MCare nor MCaid.

People under the Risk-Sharing Pool are motivated to pool together to help each other to find the most cost-effective health care, like hospitals and Drs, including helping each other with reading the hospital bills to argue against exorbitant charges, like $5 for an Aspirin when the real cost is $.05.

Under PhamaCare, people will not abuse the ER for non-emergencies like people w/out insurance today, because they know that all Primary Care Drs will glad to see them and get paid IMMEDIATELY in FULL (100%) w/out have to go through Insurance Claim and get Claim Denial for whatever minor technical reason or denial of coverage by the Ins. for certain Dx or procedures...They will easily get same-day appointment while people w/ MCare and MCaid may have to wait for days or weeks to get in to see their Drs. This is the reality nowsaday. Fewer Drs are accepting MCare and MCaid so these pts have to wait or go to the ER or drive long-distance to find a Dr. Many people w/ MCaid coverage end up in the ER because they can't find a Dr. who would accept MCaid in a timely manner.

Many Drs have quit practicing Medicine due to the hassles and burdensome by MCare, Mcaid, and Ins., with constant and treacherous denials of claims. Worker Compensation is about the worse in term of payment of Drs' Claims. Under PhamaCare, many Drs who are now in retirement because they are fed-up with the current system, will start seeing pts again, because they will be spared of having to deal with Ins. and MCare and MCaid. Their practice overhead will be minimum yet with much greater satisfaction. They will get paid upfront without hassles and no question asked. At the same time, people will learn to take better care of themselves, and will see Drs less often. The end result will be lowering of health fees and costs of procedures by purely market force alone, due to surplus of health-care capacity.

Roger Pham

So, you see, Bob, to lower the cost of health care by market force, there must be surplus of health care capacity. More Drs and Nurses must be encouraged to remain in practice. The current situation is not helping it. Regulations in health care delivery and health care financing must be streamlined in order to make the practice of medicine enjoyable.

At the same time, Drs and Hosp must be incentivised to practice cost-effectively, using the least number of procedures and medications to get the best outcome. A lot lot can be improved in this regard. CT scans and other radiologic tests now are way overused (abused), and Americans are exposed to way more radiation than previous generations, with obvious consequences of incrrease in cancer rates. The true cost of a CT scan is well under $200, but hosp are charging thousands of dollars, and exposing pts. to an equivalent of 200 plain film X-rays per CT scan. Truly Outrageous! Most pts seen in ER are receiving CT scans because this reduces Drs and Hosp liability, allowing them to see pts faster, while adding to the bottom line! Of course, Ins and Mcare and Mcaid are paying for this, who cares?

Most Primary Care Drs and NP and PA refer pts out to (expensive) specialists at the drop of a hat instead of taking some effort to evaluate and treat even fairly simple problems. This allows them to see pts faster with less thinking involved, while having less liability. Of course, Ins (third-party payer) is paying for this, so who cares? This drives up health care demands and has been driving up health care cost exorbitantly over the last many decades, due to the shortage of specialists.

PhamaCare provides a Data Mining System based on billing patterns of each Provider to see who can provide the best result with the least cost for a particular problem or chief complaint. Smart and experience Drs can charge higher fees when they can use fewer tests to achieve the same result, with less harms to pts. Less gifted Drs. are forced to lower his/her fees and see fewer pts when their care are less cost-effective, and are forced to learn to do better. Currently, they don't have to!!! Those currently who orders to most tests and give out most referrals are the most productive and make the most money!!!

Under PhamaCare, Health Care advisors can be provided to help those computer-illiterate pts seeking out via the Net for competent Drs for their condition.

Bob Wallace

Good luck with your program, Roger.

BTW, the ACA deals with creating information for consumers so that they can shop for best prices. NPR did a report on it a couple of days ago. They found that the information is not yet adequate for that aspect to function, that it will (not surprisingly) take time to build the database.

The ACA also changes the way doctors are compensated, paying them for successful outcomes and reducing the rate of over treatment and over testing.

I think if you were to actually learn about the ACA you'd find that many of your ideas are already part of our health care law.

Now, I'm ready to return to the topic of replacing fossil fuel transportation with something more sustainable.

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