In 2009, the Department of Transportation launched the Car Allowance Rebate System (CARS), commonly referred to as Cash for Clunkers. This temporary federal program was designed to take old, inefficient vehicles off the road and replace them with new, more fuel-efficient vehicles.[1] The program gave buyers “up to $4,500 towards a new, more environmentally friendly vehicle when they trade-in their old gas guzzling cars or trucks.”[2]
The 2009 program wasn’t the first time this idea was proposed. In a March 1938 meeting of the Board of Governors and the presidents and directors of Federal Reserve Banks, Fed Chairman Marriner Eccles described his concerns about the auto industry and other industries and offered options for stimulating industries. Eccles suggested the government might buy and demolish old automobiles. “That would create a greater market for new cars…If the Government, by the expenditure of $1.00, can stimulate the expenditure of $5.00, that would be valuable.”[3]
On March 8, 1938, Fred A. Carleson, a car dealer in Utah, wrote to Chairman Eccles with similar thoughts on stimulating the auto industry. “With combined effort and financing of all manufacturers, dealers, and the United States Government in a gigantic junking and salvaging program, disposing of 2,000,000 runnable but obsolete and unsafe cars in double quick time, would make it possible for this to become a 4,000,000 car year instead of half that amount.”[4]
Other efforts to stimulate the auto industry took place throughout the country in the 1930s, including a National Used Car Exchange Week. While this program did not offer a government rebate for trading in a “clunker,” it did offer low prices and financing to those wanting to upgrade to a “gently used” car. The event was widely promoted with billboard, radio, and newspaper ads, as well as parades and at least one very grand finale.[5] “In Detroit, forty clunkers that were traded in and deemed not worthy of resale became somewhat of a pyrotechnic display. An estimated seventy-five thousand people watched as they were set ablaze on Belle Isle.”[6] The program was deemed a success in accomplishing its goal of increasing car sales.[7]
[1] “Car Allowance Rebate System.” Wikipedia; https://en.wikipedia.org/wiki/Car_Allowance_Rebate_System.
[2] U.S Department of Transportation, Office of Public Affairs. “Transportation Secretary Ray LaHood Kicks-Off CARS Program, Encourages Consumers to Buy More Fuel Efficient Cars and Trucks.” July 27, 2009; http://web.archive.org/web/20091007104907/http://www.cars.gov/files/official-information/July27PR.pdf.
[3] Eccles, Marriner S. “Transcript of Notes Taken on Statement Made by Chairman Eccles at Meeting of the Board with Presidents and Directors of Federal Reserve Banks in Washington on March 2, 1938.” Marriner S. Eccles Papers. University of Utah, Box 76, Folder 12, Item 2; https://fraser.stlouisfed.org/scribd/?item_id=467444&filepath=/docs/historical/eccles/076_12_0002.pdf&start_page=8.
[4] Carleson, Fred A. “Letter to Mr. Eccles.” Marriner S. Eccles Papers. University of Utah, Box 38, Folder 5, Item 5; https://fraser.stlouisfed.org/scribd/?item_id=463230&filepath=/docs/historical/eccles/038_05_0005.pdf.
[5] Laura Bien. “Cold Off the Presses: ‘Cash for Clunkers’ in 1938 Ypsilanti.’” Ann Arbor News, August 19, 2009; http://www.annarbor.com/passions-pursuits/cash-for-clunkers-in-1938-ypsilanti/
[6] Schwerin, Christine. “Before Cash for Clunkers.” Seeking Michigan, August 11, 2009; http://seekingmichigan.org/look/2009/08/11/before-cash-for-clunkers
[7] United Press. “Auto Output Jumps Due to Bullish Sales of Used Car Week.” Pittsburgh Press, March 9, 1938; https://news.google.com/newspapers?nid=1144&dat=19380309&id=3coaAAAAIBAJ&sjid=EEwEAAAAIBAJ&pg=4174,4729710&hl=en.
@FedFRASER