$2 Billion more for clunkers

WASHINGTON — The Senate approved providing another $2 billion for the “cash for clunkers” program on Thursday night, keeping it alive through the month of August.

Senators voted 60 to 37 to continue the auto-purchase program, which quickly spent the previously allocated $1 billion. President Obama signed the legislation into law on Friday morning in the Oval Office, Robert Gibbs, the White House press secretary, said, paving the way for the money to be immediately available.

The House approved an additional $2 billion last Friday, before its summer recess. That left the Senate with a take-it-or-leave-it proposition, because if it made any changes, the House would have to take up the Senate version in September.

The Senate spent much of the afternoon and evening slogging through seven proposed amendments, all of which were defeated.

“We all know that if we change the bill it will die,” said Harry Reid, the Senate majority leader. The Senate is scheduled to begin its August recess on Friday. In the end, the bill passed largely along party lines, with 51 Democrats, 2 independents and 7 Republicans voting for it.

The “cash for clunkers” program offers rebates of $3,500 to $4,500 for trade-ins of vehicles with low fuel economy, if the buyer picks a more efficient replacement. The precise rules to qualify vary by category of vehicle.

The additional money is borrowed from another stimulus program, a loan program for green energy projects. But lawmakers want to replenish that, so the cash-for-clunkers extension spending will probably add to the federal deficit.

One amendment, offered by Judd Gregg, Republican of New Hampshire, would require that the program not place a burden on future generations.

The Obama administration has been arguing that the savings on gas spending would offset costs, and that the stimulus to the economy would be another benefit. Still, based on the popularity of the program, government officials expect that the additional $2 billion will be spent by Labor Day.

Dealers say they have made about a quarter-million new car sales incorporating the rebate, but entering the applications into the government computer system has been slowed by computer problems. The Transportation Department said Wednesday that more than 180,000 deals had been submitted, with a rebate value of $775.2 million.

About 45 percent of the cars bought under the program are from American manufacturers, about the same share as the overall car market. And many of the other new vehicles bought are made in America by foreign automakers, the department said.

A crucial question is how much Americans will actually save on gasoline. The Transportation Department said shoppers had been turning in the bigger vehicles and buying small sedans, with an average improvement of 9.6 miles a gallon.

But some industry experts pointed out that the “clunkers” being traded in tended to be the older vehicles kept as spare cars in multicar households, and driven very few miles every year.

“The new car doesn’t replace the clunker, it replaces the previous first car in the family,” said Lee Schipper, a transportation expert and researcher at theUniversity of California, Berkeley, and at Stanford University.

A question not addressed by the Senate was how long the clunkers would have been on the road anyway, absent the government payments.

Another question was how long the $2 billion would last and what would happen after that.

Even R. L. Polk, the auto market consulting firm, predicted in July that the program would handle only 200,000 cars in 2009, but it appears to have done 250,000 in July alone.

The program technically began on July 1, and some dealers began accepting trade-ins then. But the Transportation Department did not have the regulations written and the computers set up to accept applications until July 27, a Monday.

By that Thursday, although only a few thousand applications had been entered, the National Automobile Dealers Association told the Transportation Department that probably all the money had been committed.

The program caught public attention in a way that the Senate’s other recent concerns like health care legislation have not.

Comments

Not a green program

This is being sold as a "green" program. It is not. It is an auto subsidy. Will it save energy? No. A car pollutes long before it turns a wheel. The manufacture of cars is wasteful. What about better gas mileage? Any savings will go to more driving. Either the owner will drive more, or gas prices go down and someone else drives more.
We need to break from the dependency on not oil but the auto, no matter what it burns. The best way to break that dependency is to STOP subsidizing the auto and use the money for free public transit.

crisis

I heard many negative respond to this idea but I think that it can give many good results. We all should be aware of simple fact that this won't end the crisis, but governments efforts to stop all negative economical outcomes are for me optimistic, because they really are happening. And this idea - we could imagine that will give some benefits to national economy. Old cars junked, cash earned. Great. Even if they will not but new car for that, they will buy something different and someone would benefit from that. The whole economy is not about earning money but about exchanging and trade. The faster the whole wheel of exchange will spin, the faster our economy will get out of the crisis.