“Cash for Clunkers” is Stimulus Plan on Steroids
But will the Obama administration find more money to continue the program?
By Brendan Moore
Until we can get a better accounting of the deals in queue, it seems that the program formally known as the Car Allowance Rebate System (CARS), which was supposed to be offered until Nov. 1, or as long as the money ($1 billion USD) was available, is already tapped out.
That happened in less than a week.
The Department of Transportation got nervous and told auto dealers late Thursday night that the program was suspended.
The CARS program offers owners of old cars and trucks $3,500 or $4,500 toward a new, more fuel-efficient vehicle.
Now, the Car Allowance Rebate System, usually referred to as “Cash for Clunkers” is not suspended – despite news reports that it was, as a result of the Department of Transportation message. It will still be available as Washington tries to get some more funds allocated to the program.
There was some confusion late Thursday night as to whether the program was suspended, with the Transportation Department telling auto dealers to stop taking deals at midnight under the program, but with White House officials saying the program had not been suspended.
Robert Gibbs, the White House press secretary said: “We are working tonight to assess the situation facing what is obviously an incredibly popular program. Auto dealers and consumers should have confidence that all valid CARS transactions that have taken place to date will be honored.”
Many automobile dealers seemed to have been caught unawares by the Transportation Department “suspension” late Thursday. Many more dealers were unaware that the White House then refuted the suspension.
From the dealers’ standpoint, and the NADA’s (National Automobile Dealer Association) standpoint, the program is manna from heaven. If the program’s funds are zeroed out, they hope that more funding will be allocated to the program quickly.
Transportation Department officials and members of Congress are working with the White House to figure out if, and how, funding could be added to the CARS program. The Michigan congressional delegation has a meeting early Friday morning at the Transportation Department.
There is speculation that the Troubled Asset Relief Program (TARP) may be the one that provides funding to continue the program as disbursement of funds from TARP happens quickly.
The calls from Congress for more funding started even before the news yesterday that the program was out of funding, as it became apparent over the last couple of days that the program was a hit with consumers.
Rep. Candice Miller, R-Mich., penned a letter to House leaders on Wednesday requesting additional funding for CARS.
On Thursday, after the announcement of the suspension that was then rolled back by the White House, Rep. Miller stated, “This is simply the most stimulative $1 billion the federal government has spent during the entire economic downturn. The federal government must come up with more money, immediately, to keep this program going.”
The representative of House Speaker Nancy Pelosi, D-Calif., said they would work with “the congressional sponsors and the administration to quickly review the results of the initiative.”
On Thursday evening, the government web site that tracks the program showed $779 million available for deals. However, electronic and phone surveys of automobile dealers done by the NADA suggested a massive backlog of pending deals, prompting the Transportation Department to freeze the program.
Dealers have been doing tentative deals since the beginning of July, when the cash-for-clunkers program officially kicked off, but did not start processing deals until Monday of this week, when the federal government finally provided the rules of the program for dealers.
If indeed the program’s funds have been wiped out already, that means the cash-for-clunkers program notched approximately 250,000 sales in a little less than a month.
Bailey Wood, a spokesman for the NADA association, when asked about how dealers feel about the program, said, “Two hundred and fifty thousand vehicles in four weeks? One word comes out of my mouth: Wow.”
Really, it is astounding.
Which is part of the dilemma for the Obama administration. The immediate effect of the program makes it a very successful part of the national stimulus package. The extra money helps the auto manufacturers, the new-automobile dealers and the local governments that get much-needed tax revenues from the sales of new cars.
So, that’s good.
But, taxpayers are the ones that provide the money for the stimulus. Any more funds allocated to the CARS program gets added to the deficit. Citizens and lawmakers are getting very nervous about all the money spent in the last eight and one-half years by both the Bush Administration and the Obama administration.
So, more money added to the deficit would be bad.
Lastly, the other angle that the administration has to consider is, of course, public perception. There will be howls from consumers, manufacturers and dealers if the obviously popular program is simply ended without satisfying considerably more demand. There is an expensive television commercial from an auto manufacturer on about the CARS program blaring right now in my office as I type this, and that money wasn’t spent with a dead program in mind.
Giving voters something “free” like a tax rebate is good; snatching it away from them while they’re waiting in line to get it is definitely bad.
Look for some more funding to be added to the program.
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