The scrappage scheme is only a few days old here in the UK and it has already come under fire. However, in the USA critics are taking shots at the proposals before they are even implemented.
An article in the New York Times criticised the so-called “cash for clunkers” legislation that would give people vouchers worth as much as $4,500 to replace old cars with new ones. It was described as a “huge disappointment” and stated that it should deliver much better mileage.
It suggests that the House’s programme seems as though it is designed to undercut both its economic and environmental value. In Germany the credit has enticed customers to buy vehicles such as the Ford Ka, which achieves up to 56mpg, because it is part of a larger government plan that also includes tax based on carbon emissions. By contrast it states, the Congress scheme is weaker - you can simply buy a new SUV with only slightly better gas mileage and qualify for a $3,500 boost.
These payments vastly outstrip the estimated $500 a car it would cost to increase fuel economy by 10 per cent for all vehicles on the assembly line.
There are also warnings that the scheme is not aimed at households earning less than $65,000 a year - i.e. those that own most of the vehicles that are more than 10 years old. In effect it is offering subsidies to the relatively rich despite the fact that the auto industry’s survival depends on getting those with incomes below $100,000 back into the showroom.
Instead, the author proposes a federal loan guarantee programme that would provide loans at very low interest, helping to leverage the taxpayer money to create around $90billion in credit. It would also be required that the loans be used to buy cars achieving at least 32mpg to push innovation - the threshold would increase each year.
What do you think of these proposals and the scrappage scheme in general? Leave a comment with your thoughts.
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