TOPICS > Economy

Despite Critics, Senate Considers $2B Boost for ‘Cash for Clunkers’

BY Dave Gustafson   August 3, 2009 at 10:03 AM EST

'Cash For Clunkers' trade-in vehicles at Los Angeles dealership; photo by Kevork Djansezian/Getty

Transportation Secretary Ray LaHood said Sunday that the existing $1 billion pool is expected to be exhausted any day.

The House approved the money Friday before adjourning for summer recess, and the Senate leaves for recess at the end of this week. Action is needed before they leave, LaHood said.

“If we don’t get the $2 billion from the Senate…we would have to suspend the program next week,” LaHood told C-SPAN’s “Newsmakers” show. He said the administration “will continue the program until we see what the Senate does and I believe the Senate will pass this.”

The program offers up to $4,500 to trade in older gas-guzzling cars for new, more fuel-efficient models. The rush to take advantage of the program drove U.S. auto sales to their highest level in 2009, Reuters reported.

Ford Motor Co. will post its first monthly U.S. sales increase since 2007 as a result of the program, Bloomberg News reported.

Barclays’ Johnson reported that if the initial $1 billion was indeed exhausted in the past week, July’s annualized sales rate could reach the 12 to 13 million vehicle range, up from an estimated 10 million vehicle rate, according to estimates solicited by Reuters.

Demand for the program shot up when word came last week that the $1 billion slated for the program was quickly being exhausted. Jim Vertucci, sales manager of Joe Rizza Ford in Riverside, Ill., said his team sold more than two dozen cars in a day and stayed open until midnight to finish deals, according to the Chicago Tribune.

But not everyone is a fan of the program and some Republican lawmakers have questioned continuing the program.

Sen. Jim DeMint, a Republican from South Carolina, called the program an example of the “stupidity coming out of Washington right now,” reported the New York Times.

“This is crazy to try to rush this thing through again while they’re trying to rush through health care, and they want to get on to cap-and-trade electricity tax. We’ve got to slow this thing down,” DeMint said on Fox News Sunday.

Some Democrats have also expressed concerns over an extension on the program. Missouri Sen. Claire McCaskill said via Twitter on Friday that she would vote no on an extension.

There have also been some glitches to the program, which requires car dealers to destroy the engines of the traded-in cars before they receive the rebates. Dealers have to document that the car has been junked to avoid a $15,000 fine and the Web site for the program has been slow and even down because of traffic.
Despite the rise in sales, the National Association of Auto Dealers is warning its members that making cash-for-clunkers deals remains a risk unless Congress clears new funding.