Congress initially set aside $1 billion to fund Cash for Clunkers, which lawmakers thought would be enough to help finance the purchase of more than 225,000 cars and to keep the program running as smoothly as a well-tuned engine for about four months, but auto dealers and car-hungry consumers blew through that money in less than a week.
On Thursday, officials at the Transportation Department and the White House were so concerned about the trend they were seeing and the number of undocumented orders—due to complex paperwork, dealer procrastination and Web-site overload—that they decided to suspend the program at midnight. Before the suspension could actually take place, however, the White House decided to let the program continue through Friday, and then through the weekend.
Meanwhile, the House on Friday voted 316 to 109 to add another $2 billion to the Cash for Clunkers program by transferring money from the Energy Department’s loan fund. House Democrats were joined by many Republicans from Michigan and Ohio, two states where auto manufacturing is big business.
Whether the Senate will follow suit and vote this week to authorize enough money to keep the program running is anybody’s guess. Some senators are saying that the speed at which the initial $1 billion disappeared is a sign that the government’s Cash for Clunkers deal was too good and should be modified. The need to revisit the question of Cash for Clunkers funding also creates an opportunity for the Senate to strengthen the program’s fuel-economy standards for more environmental benefits.
Senator Dianne Feinstein, the California Democrat who introduced the first and much tougher Senate Cash for Clunkers bill, and Senator Susan Collins, a Republican from Maine, issued a joint statement that said: “We will insist that 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.” Many other senators seem open to the idea of creating tougher standards before committing more money to the program.
According to Robert Gibbs, chief White House spokesman, the Obama administration is looking for ways to continue the program and will honor any certificates issued for qualified new-car purchases as long as the program is in effect.
That’s good news for both auto dealers and government employees. If the government refused to honor certificates for sales that went beyond the initial $1 billion authorized by Congress, car dealers would either have to eat those costs themselves or try to take back the car from the new owner and sell it again.
Exceeding the program budget could carry even worse consequences for government employees. Under the Anti-Deficiency Act, government officials who commit the government to spend more money than Congress has appropriated could be fined, fired and sent to jail for their actions.
Given the popularity of Cash for Clunkers and its current poster-child status as a government economic stimulus program, the Senate is almost certain to authorize additional funding. Look for the money to come with the condition of tougher fuel-economy standards, which will allow Congress to claim an environmental win for the program and recover from some of the bad press lawmakers received for weakening those standards the first time around.
But the big questions are ones that no one can answer right now. How long will another $2 billion or $5 billion or $10 billion last, even with stricter fuel-economy standards to toughen qualifications and slow down the spend rate? How much money is enough and, just as important, how much is too much?
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Comments
Regarding the Cash for Klunkers program.
It really does sound great! I’m a single mom of 4. I have one minivan that somebody vanlalized, and the engine blew. It has been sitting at the shop for over a year now, waiting for a new one. To get me by till then, I bought a 1988 Ford Econoline. It gets 10 miles to the gallon. I started having problems with the charging system, and it left me stranded in a major intersection, with all the kids. It went to the shop, and I bought a 25 year old car. (Keep in mind, I have the minivan, my ‘good’ car waiting for the guy to get an engine into it.) I have tried to get a new car, rather than something old and decrepit. I can, if I have $2000 to put down. Of course, I don’t. Raising 4 kids is not cheap!
I heard about the ‘Cash for Klunkers’, then I read about it. It sounded good, so I called. There are 2 major problems for me here. 1) the car has to be running, which eliminated 2 of 3. 2) the car can’t be 25 years or older…
So, I will have to continue to drive around my old klunkers, until I finally get the newest one fixed, then my kids will. Or, until I manage to get $2000 saved and not have an emergency come up and take it away!
Just wanted to let you know. It isn’t designed for everybody. I fell right through the cracks – again. I also get no public assistance, for the record. I get child support, and work for the rest of what we need. And, we go without at times, too.
Deva- would you rather get $4500 towards a new car or just get $4500 to spend as you please?
Without arguing the economics or politics, consider this: average US car driven 15,000 mi/yr, let’s say at 15mpg. C4C program puts new car on the road at 25mpg, and with the extension, about a million new cars will be involved. That means about 4×10^8 gal/yr of gas will be saved, amounting to about 1.8%of average annual gas usage in the US.
If world fuel supply will only last 20 years, then this program will allow fuel to last 20 years and 4 months. They should be giving us money towards a new pair of hiking boots if they really want to make a difference to the environment or energy crisis.