Congress Oks Clunker Funds

Extra $2 Billion Should Keep Program Running Through Labor Day, Obama Administration Says

August 07, 2009|By Jim Puzzanghera and Martin Zimmerman | Jim Puzzanghera and Martin Zimmerman,Tribune Newspapers

The "cash for clunkers" program will continue rolling after Congress approved $2 billion in additional funding, ending a weeklong scramble to keep the popular auto rebate initiative from running out of money.

The Senate voted 60 to 37 to triple the program's $1 billion budget after the Obama administration said the program would shut down Friday without more cash. The House approved the legislation last week.

Senators acted under pressure from President Barack Obama, before they left Washington for their August recess, to continue the rebates of $3,500 to $4,500 for consumers who trade in gas guzzlers for more fuel-efficient vehicles. The Obama administration has said the additional money should last at least until Labor Day.

Supporters of the program beat back attempts, largely from Republicans, to make changes that would have, in effect, suspended it for a month if not killed it all together.

"The reality is this is a program that has been working," said Sen. Debbie Stabenow, a Michigan Democrat who called cash for clunkers "the most effective stimulus we have passed this year." As of Thursday, the auto dealers had made about 220,000 clunker deals, totaling $923 million in reimbursements, according to the National Automobile Dealers Association. But only 1,600 payments had been made, the group said.

Opponents of the program criticized cash for clunkers as poorly run because so many dealers have had trouble getting reimbursed through the government's overloaded online system.

"We should call it what it really is, another billion-dollar auto bailout," said Alabama Republican Sen. Richard Shelby. "The program, I believe, is little more than a clunker itself." Sen. Judd Gregg of New Hampshire also echoed concerns from several fellow Republicans that the country could not afford the program in the face of an estimated $1.8 trillion budget deficit this year. Some opponents also criticized cash for clunkers because it helps the auto industry - but not others.

"Why not dishwashers? Why not washing machines? Why not boats? Why not RVs? Why not other industries that are also on their backs?" said Sen. Tom Coburn, an Oklahoma Republican.

With $2 billion more available, the question is whether there are enough additional buyers to take advantage of it.

"We're already seeing the pace of sales begin to slow down in Ohio and some of the states where the program has been really hot," said Aaron Bragman, an auto industry analyst with IHS Global Insight.

Analysts and automakers have been debating how much the program is helping the industry. Many of the cars would have sold even without the incentives, and without a broader rebound in the economy, auto sales may slump to their formerly dismal levels when the program ends.

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