Friday, September 25, 2009

Clunker Economics

My friend Mike Coyne sent me this gem. I don't think the numbers are 100% accurate, but the analogy is close enough to make a great point.

* A clunker that travels 12,000 miles a year at 15 mpg uses 800 gallons of gas a year.
* A vehicle that travels 12,000 miles a year at 25 mpg uses 480 gallons a year.
* So, the average Cash for Clunkers transaction will reduce US gasoline consumption by 320 gallons per year.
* They claim 700,000 vehicles so that's 224 million gallons saved per year.
* That equates to a bit over 5 million barrels of oil.5 million barrels is about 5 hours worth of US consumption.
* More importantly, 5 million barrels of oil at $70 per barrel costs about $350 million dollars.
* So, the government paid $3 billion of our tax dollars to save $350 million.
* We spent $8.57 for every dollar saved.
* How good a deal was that ???
**They'll probably do a great job with health care though!! **

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