Quelch Says Clunker Program a Government Botch Job

Last Updated Aug 24, 2009 9:54 AM EDT

Cash for Clunkers had three primary goals: Help the auto industry, help the environment, help the poor. It failed on all three, thanks to the U.S. government's mishandling of the whole affair.

This damning review comes from Harvard Business School marketing expert John Quelch, in a blog post on Harvard Business Publishing.

"The Federal government should not be in the business of initiating and administering short-term incentive programs designed to shape consumer purchase behavior. It has no experience in such initiatives and proved itself incapable of forecasting demand associated with different incentive levels."
Where did government fail? Quelch says the size of the rebate, up to $4,500, was way too large and resulted in taxpayers subsidizing car deals that would have occurred anyway. And government-imposed bureacuracy means administration costs might reach 10 percent of program costs.

Read Quelch's entire critique How Cash For Clunkers Failed American Taxpayers. You can also look at my previous post supporting the program. Then come back here to debate this question:

Is Cash for Clunkers an exemplar of the good government can do for its people, or an illustration of why government should stay out of private enterprise? Short on time? Take our poll.

  • Sean Silverthorne

    Sean Silverthorne is the editor of HBS Working Knowledge, which provides a first look at the research and ideas of Harvard Business School faculty. Working Knowledge, which won a Webby award in 2007, currently records 4 million unique visitors a year. He has been with HBS since 2001.

    Silverthorne has 28 years experience in print and online journalism. Before arriving at HBS, he was a senior editor at CNET and executive editor of ZDNET News. While at At Ziff-Davis, Silverthorne also worked on the daily technology TV show The Site, and was a senior editor at PC Week Inside, which chronicled the business of the technology industry. He has held several reporting and editing roles on a variety of newspapers, and was Investor Business Daily's first journalist based in Silicon Valley.