By Martin H. Bosworth and Mark Huffman
ConsumerAffairs.com
July 31, 2009
The House of Representatives last evening came to the rescue of the Car Rebate Allowance System (CARS), aka "Cash For Clunkers," authorizing an extra $2 billion in cash to keep the program primed for trade-ins.
Coming on the heels of reports that the program would end today due to excess demand for trade-ins surpassing the funds, the White House denied that the program was being suspended.
Car dealers were thrown into a panic late Thursday when it looked like the program had run its course before many dealers got ramped up. National Automobile Dealers Association spokesman Bailey Wood said Thursday that the group had been told by Transportation Department officials of plans to suspend the program after just six days.
White House economic advisor Christina Romer, interviewed on the business cable network CNBC, said she could confirm that the program remains viable and operating. She said the White House would support Congressional efforts to pump an additional $2 billion into the program.
White House spokesman Robert Gibbs said the program would continue to honor all deals made for the time being.
The clunkers program has been the most successful of the economic stimulus progams thus far -- and the one that's most likely to have an immediate effect on Main Street USA, observers noted. Sales of new cars not only pump money into dealers' pockets but also produce big tax proceeds for cash-strapped state and local governments.
The CARS program, where buyers could trade in their old gas-guzzler for a $3,500 or $4,500 voucher towards a more eco-friendly car, had over 200,000 requests pending within four days of its launch.
Under the original bill, the funding only covered 250,000 cars, but it was estimated that it would be at least October before than many were sold.
The program certified 22,782 car trades since Monday, according to the National Highway Traffic Safety Administration (NHTSA), but a survey of dealers found that there was a backlog of 25,000 trades still awaiting clearance. The agency also rejected many claims due to illegible or incomplete paperwork, according to the Detroit Free Press.
Many auto dealers around the country were reporting brisk business as a result of the program, while others were claiming the procedure for approval was too difficult and was leaving them unable to make transactions.
The program was criticized on a number of fronts, with Republicans and some Democrats claiming the cost would be too high and provide too little stimulation to the economy. Environmental activists claimed the program actually favored purchasing of SUVs and "crossover" vehicles, due to inconsistencies in the Environmental Protection Agency (EPA)'s mileage standards.
And it wasn't long before the program was announced that a proliferation of scam operations appeared, looking to take advantage of the expected flurry of business in the auto market.
The request for the extra funds now goes to the Senate, where it may not pass easily. Several Senators, such as Dianne Feinstein (D-CA) and Olympia Snowe (D-ME) want to tie any future funding to requirements that the new vehicles get better miles-per-gallon (MPG) fuel-efficiency ratings.
With less than a week until Congress recesses for the month of August, and both houses currently occupied with moving health care reform along, the clock may also simply run out before the funds can be authorized.
But the program's popularity will most likely ensure it will get the funds it needs to keep cars rolling off lots and clunkers headed for the great junkyard in the sky.
