'Cash-for-clunkers'

The Obama administration’s cash-for-clunkers initiative has so far led to over 240,000 Americans trading in their old cars for $3,500 worth of credit. Time magazine has reported that:

The clunkers averaged 15.8 m.p.g., compared with 25.4 m.p.g. for the new vehicles purchased, for an average fuel-economy increase of 61%. On the whole, American drivers are trading in inefficient trucks and SUVs for much more efficient passenger cars. Car manufacturers like Nissan are already retooling some models to improve their fuel economy so they can qualify for the credits.

Despite these pleasing results, there remains fierce criticism of the multi-billion dollar stimulus package. The fact that the Senate is likely to approve an expansion of the original Car Allowance Rebate System’s budget has angered many fiscal conservatives. If however, as some commentators forecast, the cash-for-clunkers scheme boosts the US economy by as much as $18billion, the economic debate surely becomes a moot point. Instead, the issue of how stringent and at what level regulations for new car production needs to be set, should be the focus.

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