Cash for Clunkers: A Government Subsidy Program that is Working
We all know what conservative Republicans and Libertarians tell us. Government subsidy programs don't work: they provide little or no stimulus to the economy. They fail. But in the real world that claim can be refuted, sometimes spectacularly so: The House of Representatives voted to provide an emergency $2 billion for the "cash for clunkers" program on Friday, and the White House declared the program very much alive, even though car buyers appear to have already snapped up the $1 billion that Congress originally appropriated. The House shoved other business out of the way on its last day before the August recess to rush through a measure to address the cash shortage of the car program. The vote was 316 to 109, with significant support from Republicans as well as Democrats…. Over all, 239 Democrats and 77 Republicans voted in favor, while 14 Democrats and 95 Republicans voted against the measure. The program has only been in existence for a little over a week and was initially funded at $1 billion, but it has been such a stunning success that the supplemental for an additional $2 billion became necessary: Sen. Debbie Stabenow, D-Mich., said about 40,000 vehicle sales had been completed through the program but dealers estimated they were trying to complete transactions on another 200,000 vehicles, putting the amount of remaining funding in doubt. Also, Representative Ed Markey of Massachusetts, one of the authors of the original bill…declared Thursday night, "Cash for Clunkers may have run out of cash, but America's consumers haven't run out of clunkers." He said it should be extended to cover 1 million vehicles, about four times the number covered so far. Mr. Markey said so far participants in the program were getting a 69 percent improvement in fuel economy, with the trade-ins being mostly sport utility vehicles, trucks and vans with over 100,000 miles, being replaced with new passenger cars. Obviously, the program is not only helpful to consumers but also the ailing automobile industry: The sudden legislative action was prompted by the overwhelming response to the program, formally known as the Car Allowance Rebate System, which its backers say has helped not only car buyers but the struggling automobile industry…. Until the cash-for-clunkers program began, the auto industry had been on track for annual sales of about 10 million units, down from the peak of about 16 million units a year. The bill should be taken up by the Senate next week but with some emendation: The Senate, which will be in session next week, will take up the program then. A spirited debate is likely, as some senators have said they will use the opportunity to push for tougher fuel-efficiency requirements. If the Senate does not go along with the House's version, the House might have to return to work on a compromise…. Senators Dianne Feinstein, a California Democrat, and Susan Collins, a Maine Republican, said in a joint statement that "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." For cars, the current minimum improvement is five miles a gallon. And, they said, to help low-income car owners take part, they would include vouchers for fuel-efficient used vehicles. [u]nder the program, a buyer who picked a car with a mileage improvement of more than four miles per gallon but less than 10 were eligible for $3,500; a buyer whose new vehicle was rated 10 miles per gallon or better than the old one was eligible for $4,500. I suspect that Feinstein and Collins are correct in wanting to push the mileage envelope a bit. It would reduce our dependence on foreign oil that much more and would probably be better for the environment.
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