by Leslie Schwab

Created on: August 30, 2009   Last Updated: September 02, 2009

The Cash for Clunkers program ended on August 24, 2009. A total of three billion dollars was set aside by the federal government to fund this program, after allocating over seven hundred billion dollars to the economic stimulus program. Unlike the questionable results achieved from the major stimulus package, the three billion dollar stimulus of the automotive industry has shown to have provided a clear boost to our nation's economy.

For one thing, it has stimulated the sale of over 700,000 new cars and trucks, while ridding the highways of the same number of older, gas-guzzling vehicles. The sale of each car contributed a percentage of tax revenue to the states in which the vehicles were sold. The cars and trucks that were traded in will be recycled to produce more vehicles, and other consumer products.

Second, the Cash for Clunkers program has stimulated the cash flow of many related businesses. Of course, car and truck dealerships had to hire more salespeople and office staff to handle the influx of trade-ins. Junk yards have greatly benefited from the new source of used automobile parts.

Added employees have been earning more income; part of which goes back to the federal government in the form of income tax, while a portion is spent at stores and restaurants. Although the vehicles traded in can no longer be driven, their other components can be salvaged and sold.

Third, the major automobile manufacturers have benefited greatly from this program. Domestic automakers were able to reduce their inventories, and even hire back some of the workers that were laid off. Critics of this program have pointed out that the majority of vehicles purchased were produced by Toyota and Honda, both Japanese-based corporations. It is also true, however, that many of the cars they sold were manufactured at assembly plants in the United States.

Finally, there are the environmental benefits that will result from this program. The new vehicles have an average improvement in fuel economy of ten miles per gallon over the gas guzzlers that were traded in. Without resorting to mathematical calculations, it is clear that if each new car was driven an average of 12,000 miles per year, the savings in gasoline would amount to millions of gallons per year. Along with the reduction in fossil fuels, the reduction in our "carbon footprint" would be substantial, as well.

It is true that the Cash for Clunkers program is only a temporary economic fix. It has been one, however, that has shown clear benefits. Similar programs may even be used to encourage the purchase of major home appliances, as refrigerators, washer and dryers, and air conditioners that are more energy-efficient than older products.

It may even be argued that these small business stimulus programs should have been implemented, instead of the the gigantic bailouts of AIG, various banks, and Wall Street investment firms.

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