Cash For Clunkers Gets A $2 Billion Cash Infusion And Rises From The Dead.. For Now

More Cash – For Cash For Clunkers

It was only a week ago that we were talking about how the Cash For Clunkers program had only been active for a week, and it was already running out of money.  $1 billion dollars had been assigned to the program and after demand for the vouchers was much larger than anticipated, the program had to suspended.   The government didn’t want people trying to get a voucher that was no longer available.

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Now, a week after the program was suspended, Congress has decided,  that the program was such a rousing success, that they should give it another $2 billion dollars.   Last night they approved an extension of the program:

The U.S. Senate approved and sent to the White House on Thursday a $2 billion extension of the “cash for clunkers” autos sales incentive program.

The measure, approved by 60 to 37, extends the successful program that has raised sales of the U.S. auto industry.  President Barack Obama was expected to sign it quickly.

The initial $1 billion of funding approved in June for “clunker” business has generated more than $920 million in rebates and more than 220,000 in auto sales.

Supported by the incentive program, U.S. auto sales overall were down about 12 percent in July from a year earlier, but it was their best performance this year.

A poll was done last week asking a sampling of Americans if they thought the program should get more money.  54% of the respondents said that it shouldn’t.  Despite a majority of people being against the added expenditure, the program will now be continued.

The swift “success” of the program was stunning to a lot of people, and to some degree the government wasn’t ready for the deluge of voucher submissions that happened in the first week.

The administration, stunned by the swift success of the initiative and stung by a series of administrative glitches in trying to process rebates, had warned that the “clunker” measure would be suspended if more money was not approved by week’s end.

The House of Representatives passed the $2 billion extension on July 31. The Senate took a week to affirm that action.

Some senators did introduce amendments to the bill in order to try and kill the measure, but those were soundly defeated – and the program was approved for more money.   So if you had planned on trading in your clunker, you may still have time – but act quick!  Who knows when it will run out this time.  For more details about the program, who is eligible, and what you need to do, check out these articles on our site:

Not Everyone Is Happy With The Program

Some critics argue that while the program was successful in handing out vouchers to thousands of car buyers, that the program isn’t truly as much of a boon to our economy and the environment as is being suggested.

Groups that aren’t as happy with the program as car dealers?  Mechanics,  scrap yard operators and automotive aftermarket parts dealers.

Who doesn’t like the government’s “cash for clunkers” program? Your mechanic, for one.

Owners of automotive repair shops say the program to help invigorate sales of new cars is succeeding at their expense.

Bill Wiygul, whose family owns four repair shops in Virginia, said he has already had five or six customers decide against repairs. A man who sits on the board of Mr. Wiygul’s bank traded in his car rather than repair it. “He’d been a customer at our Reston store since it opened,” Mr. Wiygul said….

How do we get on the special interests, special treatment bandwagon? How much is it going to cost me and to whom shall I send the check?” he said. “Who picks the winners in this game ’cause obviously the game is fixed.”

So the government is subsidizing one industry (in which it now holds a large stake) at the expense of other small business people like mechanics and repair shops.

The automotive aftermarket, a $250 billion industry that employs about 4.6 million people, could be among the biggest losers in the clunkers program, said Kathleen Schmatz, head of the Automotive Aftermarket Industry Association: “It’s everybody from the Fortune 500 parts manufacturer all the way through the supply chain to the independent repair shop.”

The group that lobbies for independent mechanics in Washington agreed.

“This package will hurt mechanical repairs without question. You are taking older vehicles that are still fine to use and removing them,” said Robert Redding Jr., the Automotive Service Association’s Washington representative. “If you’re taking hundreds of thousands of vehicles that you normally service off the road with no consideration, it hurts people.”

Has The Program Helped The Environment Or Stimulated The Economy?

Even if you dismiss those who have been hurt as having sour grapes, you still need to consider whether the program will actually succeed in it’s aims of helping the environment and stimulating the economy.  So, first, did it help the environment?

Cash for clunkers could have the same effect on global warming pollution as shutting down the entire country — every automobile, every factory, every power plant — for an hour per year. That could rise to three hours if the program is extended by Congress and remains as popular as it is now.

Climate experts aren’t impressed.

Compared to overall carbon dioxide emissions in the United States, the pollution savings from cash for clunkers do not noticeably move the fuel gauge. Environmental experts say the program — conceived primarily to stimulate the economy and jump-start the auto industry — is not an effective way to attack climate change.

So it sounds like the program will have a negligible effect on the environment – especially when you  take into account the scrapping of all the working cars that could have otherwise been kept running for years to come.  How about stimulating the economy?  Alan Greenspan says that while he supports the program, he doesn’t think that it helped to stimulate the economy.

The former head of the Federal Reserve gave a thumbs-up to the cash for clunkers program but said Sunday it is popular only because the economy was on its way back up and not because it was stimulative.

Alan Greenspan said that the program has worked to get people to buy cars and move stock, but he wouldn’t necessarily recommend it as an economic fix.

“It’s an interesting issue. I mean, I have qualms about the concept, but there is no doubt that that very extraordinary response is a very important indicator that the state of confidence in the economy is beginning to pick up. If we had been — the clunker program had been put in place six months ago, it would have probably been a dud,” Greenspan said on ABC’s “This Week.”

So the program has been successful in Greenspan’s eyes, but only because the economy was already starting on it’s way to a slow recovery.

Still, the administration and many in congress are hailing the program as a marvelous success, and say that it is one of the main reasons for a rebound that is beginning to happen in our economy.

What do you think about the program? Has it been successful in it’s aims, and was it a good idea?  Or do you side with the critics of the program and think that the program is just another government money drain? (can  you tell which side I come down on?)  Let us know your thoughts in the comments.

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Last Edited: 11th February 2014

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  1. says

    I was thinking about this yesterday and actually the extent it might at least represent some government innovation in trying to solve a problem – whether or not they’ve been successful or how successful – I guess it’s trying to fix two birds with one stone. As for the “sour grapes” argument, it’s unfortunate for those groups but it doesn’t make a compelling argument in this context because in an otherwise free-market system competition kills off other groups/companies all the time, just as Wal-mart has done with small businesses everywhere.

    I think the biggest detractor is the environmental claims. While more energy efficient cars will certainly help to some degree, we all live beneath the same sky and these improvements won’t add up to anything next to the massive air pollution still happening in China (to point them out only due to their size and the amount of polluting activity). Sounds like C4C was primarily a stimulus act, and to that extent, the government might as well have given everyone checks. This way, everyone also has a bunch of new debt.
    MoneyEnergy´s last blog ..A New Trick For Stemming Inflation? The Fed Now Pays Banks Interest For Masses of Excess Reserves

  2. says

    Whether we like it or not is kind of irrelevant! The program is a success according to the officialdom in DC and Detroit.

    At the risk of being redundant (I think I wrote this in regard to an earlier post on Bible MM), any program that’s a monetary give away will “succeed”. People will line up at the trough and do what ever they’re directed to do in order to get their share.

  3. says

    I agree with Kevin! Anytime the Government claims to be handing out free money there will always be open arms. The problem that people seem too blinded to understand is that it is not free money. It was printed out of thin air and someone has to pay for it.

    1) I think we should conserve and do our part to take care of the planet but I think Global Warming is the biggest hoax ever. Pseudo science is not science, it’s an agenda. Creating a program under the guise that it will “help” the environment is laughable.

    2) Creating a program that is supposed to stimulate the economy by asking broke people to go into debt is insane. It boosted sales for one week. The economy is stimulated by the people not by the Government.

    I said it before. Cash For Clunkers is Debt For Suckers! End of story.
    Brad @ enemyofdebt´s last blog ..Debt Free Friday Presents: A Total Money Makeover Success Story

  4. says

    Cash for Clunkers is devastating to charity car donation because the cars are now being turned in for a voucher are the ones that previously were donated to charity for a tax deduction.

  5. Golfing Girl says

    I get so angry every time I hear what a fabulous program this is and how it’s saving the environment or saving people money. We are filling landfills with cars that still have thousands of good miles on them, and I for one have no interest in subsidizing someone buying a new car who can’t really afford it (at least seemed they couldn’t before this program).

    I will continue driving my perfectly good 95 Jeep and will not ask my fellow Americans to upgrade me to a new minivan. I choose to save up and pay cash for a slightly used minivan (a la Dave Ramsey).

  6. says

    The unfortunate part of this whole thing is that before cash for clunkers was passed, car donation charities asked that they be given the c4c cars. They would decide the best use for them. Cars in good shape would be repaired and sold or given to the poor. Those in bad shape would be junked. This would have avoided most of the “unintended consequences” of c4c.

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