‘Cash for Clunkers’ Out of Cash — But Not Quite Finished

The U.S. DOT may have notified car dealers last night that its watered-down "cash for clunkers" plan was already out of cash, but that doesn’t mean the rebates are on their last legs. With the White House vowing to protect the program, Congress soon could have to decide whether to keep the good times rolling for auto companies.

ap_gma_cash_clunkers_090731_mn.jpg(Photo: AP)

Lawmakers approved an initial $1 billion in June to offer taxpayer-subsidized credits of $3,500 and $4,500 to new car and truck buyers, reportedly prompting dealers to begin assuming backlogs of "clunker" rebates that were abruptly cashed in when the program formally began this week.

That rush to capitalize on the "clunkers" deal has led Democrats as well as many in the media to frame the program as, essentially, a victim of its own success.

Rep. Ed Markey (D-MA), co-author of this Congress’ landmark climate change bill, said in a statement that he hopes to spur a million car trade-ins: "Cash for Clunkers may have run out of cash, but America’s
consumers haven’t run out of clunkers."

Sen. Charles Schumer (D-NY) echoed Markey’s call to keep the program alive, calling it "maybe even too successful." He suggested giving the rebates "a tuneup so that we get the most stimulus, conservation, and efficiency for the buck."

Indeed, the question this morning may not be whether the program gets more money but if environmentally-minded lawmakers heed the warnings of conservation groups and insist on greater fuel-efficiency improvements in order to qualify car buyers for the deal.

Sens. Dianne Feinstein (D-CA) and Susan Collins (R-ME), who joined Schumer on a rival "clunkers" bill that would have set stricter fuel standards, announced last night that they would only support a stronger version of the program:

We
believe that any extension of the ‘Cash for Clunkers’ program must go
further in advancing the goals of better fuel efficiency and greater
emissions reductions. We will not support any bill that does not meet
these goals.

We
will insist than any extension of the program requires that the minimum
fuel economy improvement for newly purchased vehicles be at least two
miles per gallon higher than it is under the enacted Clunkers program.
It is also important to include lower-income consumers who are
disadvantaged under the current program. So, we would also include a
voucher for the purchase of fuel efficient used vehicles.

Collins and Feinstein are likely to face resistance from lawmakers from auto-producing states such as Michigan and Ohio, who won looser rules to help resuscitate their local industry and moved environmental concerns to the back seat.

One thing is certain: With the House set to depart this weekend for a month-long recess, prospects of reaching an agreement on more cash for the program appear slim. But Congress and the White House have proven themselves willing to go the extra mile to help automakers — so lawmakers may still pad car buyers’ pockets before leaving town.

  • “maybe even too successful.”

    How is success being evaluated? If the only goal is to put 250,000 new cars of the road, then, yes, let’s declare victory. But if the goal is to reduce carbon emissions overall (which I thought it was), it may be better to hold off for a while before jumping to this conclusion.

    Are we taking into account the carbon emissions of production of these new vehicles?
    How many of the participants may have opted to use transit without the $3500 subsidy for a new car?
    Will the owners of more fuel efficient vehicles simply compensate by driving them more?
    Will auto manufacturers use these profits to continue to create more fuel-efficient vehicles or will they pour it back into more clunkers once the federal tap turns off?
    Do we even know the extent of the fuel-efficiency gains?
    Is this the most effective use of $1 billion dollars in terms of carbon reductions?

    I’d like some answers to these questions before evaluating success.

  • Jordan

    It doesn’t matter if they dole more money. They problem is still the backlog. Read this article: The Real Reason for the “Cash for Clunkers” Suspension. The ex car salesman blog shares exactly why they stopped the program. Even reports that some sales managers are calling asking for the money back because they were denied the rebate when the final paperwork was submitted but their car was already ruined by dumping a solution in the engine. They now have no car. Scary. See: http://tinyurl.com/ml9sdo

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