House Passes Cash for Clunkers Bill; Taxpayers are Left to Wonder Why
Meanwhile, an almost identical bill seems to have stalled in the Senate. To help break the stalemate, a coalition of senators led by Dianne Feinstein (D-Calif.), who sponsored the original and much tougher Cash for Clunkers legislation, introduced an alternative measure that would require greater fuel efficiency than the House bill.
To qualify for a voucher under the alternative Senate plan, consumers would have to trade in a car rated at 17 mpg or less and purchase a new car that gets at least 24 mpg. Consumers could receive a $2,500 voucher for a new car that gets at least 7 mpg more than their old car, $3,500 for a new car with a 10 mpg gain in fuel efficiency, and $4,500 for one with an increase of 13 mpg or more.
The White House favors Cash for Clunkers as part of ongoing efforts to rescue the ailing auto industry, cut U.S. fuel consumption and reduce greenhouse gas emissions. Many members of Congress also support the Cash for Clunkers strategy, and the auto industry loves it. Many environmentalists have become disenchanted as political compromises have weakened or watered down environmental provisions in the original legislation.
Aside from all that, an increasing number of observers have started to question whether a Cash for Clunkers program could really succeed, especially in the current economic climate. Unemployment is hovering around 9.4 percent nationally, which means fewer people may be interested in shopping for new cars, even with a government voucher to help with the down payment. And it’s not clear whether a Cash for Clunkers voucher would always exceed, or even equal, the regular trade-in allowance consumers could get for their old cars.
Cash for Clunkers supporters say the program would take a million gas-guzzling cars and trucks off the road in a single year and replace them with more fuel-efficient vehicles, but the Congressional Budget Office estimates the program would more likely result in about 625,000 new car sales. Despite the billions of dollars that have been invested to help bail out the U.S. auto industry, auto sales were down 34 percent in May 2009 over the same month in 2008. Looking ahead, the U.S. auto industry is expected to generate about 9.5 million new vehicle sales in 2009, compared to more than 13 million in 2008 and more than 16 million in 2007.
If Congress succeeds in pushing through a Cash for Clunkers program, it is expected to cost taxpayers somewhere in the neighborhood of $4 billion, yet it is increasingly unclear what real benefits—either economic or environmental—we will get for that investment. Ironically, any improvements in fuel efficiency the Cash for Clunkers program may achieve will be far less than those anticipated from the Obama administration's new CAFE standards, which mandate a combined average fuel efficiency of 39 mpg for passenger cars and 30 mpg for light trucks by 2016.
So why are so many people committed to such a questionable strategy?
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Comments
This is horrible governing (and oversimplification). Most stories aren’t even complete in their summaries of the proposal (e.g. is the voucher an amount on top of the trade-in value negotiated during the purchase or a blanket assessment that would leave the owner of a $6000 vehicle unincentivized?) Further, why require destruction of working powertrains (and unspecified other parts), and who is going to audit that process? Additionally, the measure is clearly not equitable, bribing those who clung to gas-loving vehicles while snubbing those who’ve recently traded, and missing the opportunity to appeal to people with newer vehicles.
This is what happens when you have a bunch of ninnies running our government. Most of Congress has never held a real job in the private sector and have no clue how our economy works. They’re continued interference is only going to make things worse. It is time to get the incumbents out. Put someone else in in 2010!
Very few cars last forever, especially if you are driving them on a regular commute. If a driver has a car that fits within this specification, chances are it will have to be replaced. Maybe this isn’t the perfect solution but in the long run we need to provide incentives to purchase more full efficient cars. I don’t think we can rely on the Prius commercials, no offensive intended toward Toyota.
60% the cars that are currently donated to charity will now be eligible for a $3500 or $4500 voucher under the cash for clunkers program. Since the tax deduction for donating a car is only $500 or what the car sells charities won’t be able to compete with the program and charitable car donation will end. A better idea is to just change the amount a person can deduct for donating their car back to the book value. That way every car is eligible, the government doesn’t have to spend $4 million of our dollars giving away vouchers and trying to administer a program that is way too convoluted!
My question is why only new vehicles? My car is twenty two years old and gets 10 mpg. It is a mid size car that still passes emmissions but even when it was new the best it was rated for was 16 mpg on the highway. My company went under last August to the economy and my unemployment ran out last week (Obama extention is being held up)so I can’t afford a new car! If the government is serious about getting old cars off the road then allow us to use that voucher towards a newer used vehicle that does meet the standard but without the sticker shock.
This is a thinly veiled attempt to manipulate behavior via a false threat: although there is no GW & CO2 is not a problem, they think it is something they can lie about and scare us into believing.The we’ll want to act. They really just want to stimulate us into buying a new car. Why don’t they just say so? (Because they can use this excuse again when they need it for other social engineering projects that only they benefit by at our expense.)
This is a fascinating bill – though I’m seriously concerned about some of the negative implications it may have (see http://www.mindreign.com/en/mindshare/Environmental-Concerns/Cash-for-Clunkers/sl36962308bp294cpp10pn1.html) It’s really only a moderate reform… greater reform needs to happen as oppose to this.
Im a 36 year old male on dialysis. I use to drive a 1995 volvo 940 , my motor went out and i didn’t have enough money to get another vehicle..My income is 630.00$ a month, i have a 6 year old son and that volvo was how i got back and forth to dialysis..Im on disability and working is not an option..this deal would work for me because i can pick my son up from school, go to dialysis, and grocery shopping, instead of taking a transport van that picks me up late and may or may not pick me up after my treatment..What should people in my situation do, think about others and not just about yourself, you have able bodies to work everyday, what if your situation changed for the worst thats why we pay taxes but we complain about it, until you need the government to supply what you need
Not sure who this helps? What about people in low income brackets that are driving clunkers because that’s all they can afford, sure 4500.00 is a nice piece of change but if they can’t afford the balance on say a newer price vehicle, that dosen’t work well for them in the end. Sure there are some used vehicles that go for 4500.00 or less that maybe have decent gas mileage that would be beneficial for lower income families to help them.
Mr. Wallace: Colleen has it right. At $600/m income, there is no new car you can afford, even after a $4500 rebate. That program has actually made your situation worse because it destroyed 600,000 used, but useable cars, lowering the supply of used cars without changing demand. Net effect: used car & parts prices go up. You don’t need a new car, just repairs to your old one, now made more expensive by this helpful govt program.