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Senate Passes 'Cash For Clunkers' Bill

Obama expected to sign auto stimulus package quickly

By Mark Huffman
ConsumerAffairs.com

June 18, 2009

The bill sailed through Congress after Democratic backers attached it to a bill that provides funding for troops in Iraq and Afghanistan. It's intended to boost U.S. auto sales, reduce dependence on foreign oil and improve air quality, although critics say it's unlikely to achieve any of those goals.

The Congressional Budget Office estimates that the bill will result in the sale of 150,000 new cars.

"This program will provide a much-needed boost to the struggling auto industry, including manufacturers, dealers, suppliers and other related industries," Sen. Carl Levin, D-Mich.

Supporters include not just domestic automakers. The Association of International Automobile Manufacturers (AIAM) was also a cheerleader for the measure.

"We expect the 'cash for clunkers' program to help stimulate the economy and drive an increase in industry sales. Such a program will also radiate economic benefits out to suppliers, dealers and small businesses all around the country," said AIAM CEO Michael J. Stanton.

"Fleet modernization programs have been previously adopted by many countries in Europe and Asia, producing very positive results. With the auto industry playing such a key role in the overall health of the American economy, AIAM believes the successful implementation of this program can play a significant role in fueling the recovery of the nation's economic health," he said.

The bill would require that trade-ins get no better than 18 miles per gallon, be a 1984 or newer model, and have been registered and insured during the past year. The last provision is intended to keep quick-buck artists from flooding the program with junkers scavenged from used car lots.

If consumers purchased a new vehicle that gets an extra four miles per gallon or more, they would receive a voucher for $3,500. If they purchased a new vehicle that gets 10 miles per gallon or more than their trade-in, the value of the voucher goes up to $4500.

Critics object

Is it worth it? Not everyone thinks so.

Republicans say the program would cost too much and accomplish too little.

Perhaps surprisingly, some environmentalists are also critical. These critics, inclduing Sen. Dianne Feinstein (D-Calif.), say the measure is not strict enough in its mileage requirements and could, under some circumstances, subsidize the purchase of gas-guzzling SUVs.

"It is amazing how quickly a good idea can go bad in Washington," said Feinstein and Sen. Susan Collins (R-Maine) in an opinion article in the Wall Street Journal, headlined: "Handouts for Hummers."

Auto industry analysts say the plan, if implemented, could stimulate new vehicle sales beginning as early as August. Since many of the "clunkers" are in the truck category, they say the plan would likely have the most impact on U.S. truck sales.

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