The Other Looming Debate Over ‘Cash for Clunkers’ Funding

Thursday, August 06, 2009 at 6:00 am


While Senate leaders have reached agreement on a $2 billion extension of the cash for clunkers program, many lawmakers are already bracing for a more distant confrontation: The likely debate over how to return that funding to another stimulus program that it came from.

Illustration by: Matt Mahurin

Illustration by: Matt Mahurin

The House last Friday provided the generous lifeline to the wildly popular clunkers program — which grants drivers up to $4,500 to scrap their gas guzzlers for more fuel efficient vehicles — and the Senate is poised to pass that bill Thursday. But there’s a glitch. The proposal steals its funding from a Department of Energy program encouraging the development of renewable energy technologies. That initiative, granted $6 billion under this year’s stimulus bill, provides federal loan guarantees to clean energy projects — including solar, wind and biofuel innovations — in hopes of spurring private investment in those industries. Tens of billions of dollars in loan applications are before the DOE, but the program funding was seen by lawmakers as low-hanging fruit because it wouldn’t be spent until next year, at the earliest.

The saga has created a dilemma for a number of lawmakers who support the cash for clunkers extension but don’t want to pilfer from the loan guarantee program to fund it. “I would hate to see us take money from that source,” Sen. Jeff Bingaman (D-N.M.), who chairs the Senate Energy and Natural Resources Committee, told CNBC on Tuesday. “I hope we can find an alternative.”

They didn’t. Although seven amendments to the House proposal will be offered on the Senate floor Thursday afternoon, none aims to locate a new source of the $2 billion. The Senate plans to vote on final passage later in the day, Senate Majority Leader Harry Reid (D-Nev.) announced Wednesday night.

Indeed, with the House having left town Friday for a five-week vacation, any changes at all to the House-passed bill are unlikely. The reason? If the Senate alters the proposal, then either (1) cash for clunkers will have to forgo the additional funds until Congress returns in September, or (2) House lawmakers will have to return from recess to iron out the differences between the two bills. In light of the overwhelming popularity of the program, the former option is a political landmine. And on Wednesday, the office of House Speaker Nancy Pelosi (D-Calif.) pretty much ruled out the latter scenario. “The House isn’t coming back,” said Pelosi spokesman Brendan Daly, “so that‘s just a dumb idea.”

More likely, the Senate will pass the House bill, and push to replenish the $2 billion loan funding at a later date. Indeed, Democratic leaders have gone out of their way to assure Bingaman and other loan guarantee supporters that the money will be replaced. Shortly after Friday’s House vote, for example, President Obama vowed to work with Congress to replace the funding “down the road.” On the same day, Pelosi promoted the importance of having all $6 billion available for the loan program. And, responding to concerns voiced by Rep. Edward Markey (D-Mass.), House Appropriations Committee Chairman David Obey (D-Wis.) said Democratic leaders “have every intention of restoring these funds.”

But that might be easier said than done. With the Democrats hoping to pass a health reform agenda tickling the $1 trillion mark, finding ways to pay for another $2 billion program won’t be easy. And in the wake of spending hundreds of billions of dollars salvaging the economy, many in Congress have lost their tolerance for deficit spending. This is true not only in the eyes of conservative deficit hawks, but also some Democrats as well. Sen. Claire McCaskill (D-Mo.), for example, had hinged her support for cash for clunkers on a single mantra: No new spending. On her Twitter account, the Missouri Democrat said Monday that she “may support” the addition funding –”if it is $ already appropriated for stimulus.”

A failure to reinstall the “borrowed” $2 billion would spell bad news for the renewable fuels and technologies industries, which are banking on the loan program to jump-start the innovations that might wean the country from its current reliance on foreign oil.

“For the U.S. long-term auto and fuel needs, it seems counterproductive to limit the renewable fuels industry,” Bob Dinneen, president and CEO of the Renewable Fuels Association, said in a statement last week.

Supporters of the loan guarantee program also argue that, even if it lacks the catchy name and political appeal of cash for clunkers, it provides much more bang for the buck. Indeed, each $1 provided under the loan guarantee program is estimated to spur $10 in additional investment and spending.

“$2 billion in the cash for clunkers program results in $2 billion worth of economic activity,” Sam Jaffe, senior research analyst at IDC Energy Insights, a consulting firm, wrote for Greentech Media on Tuesday. “$2 billion in loan guarantees will result in at least $20 billion worth of economic activity, all of which will have to take place on U.S. soil.”

Not that cash for clunkers doesn’t have any environmental or stimulus benefits. On Wednesday, the Department of Transportation released figures revealing that, of the nearly 185,000 transactions prompted by the program, the average fuel efficiency of new purchases is 25.3 miles per gallon, while the average mileage for the trade-ins is 15.8 mpg.

Figures like those have alleviated some lawmakers’ criticisms that the program’s mileage requirements don’t go far enough to encourage the purchase of small, energy efficient vehicles. Sens. Dianne Feinstein (D-Calif.) and Susan Collins (R-Maine), for example, had vowed to oppose any new funding unless the mileage thresholds were made more stringent. On Monday, however, the lawmakers backed off of their threat.

“The original intent of the ‘clunkers’ program was to encourage people to buy more fuel efficient vehicles, and the data so far tells us that’s exactly what’s happening,” Feinstein said in a statement announcing her support.

Still, there is growing recognition that, as a long-term environmental strategy, the DOE’s loan program will have much greater effect. “It is not appropriate for us to take money to do one thing for fuel efficiency,” Pelosi said, “out of an account that is designed to do just that.”



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Comment posted August 6, 2009 @ 10:23 am

Program runs through Nov 1, 2009 or when the funds are exhausted, whichever comes first.


Clunker cash question: What has it done to reduce carbon emissions? « Christopher A. Haase
Pingback posted August 6, 2009 @ 1:00 pm

[...] From Washington Independent A failure to reinstall the “borrowed” $2 billion would spell bad news for the renewable fuels and technologies industries, which are banking on the loan program to jump-start the innovations that might wean the country from its current reliance on foreign oil. [...]

Comment posted August 6, 2009 @ 2:25 pm

Dealers are forced to destroy perfectly good cars.

There are deeper reasons why the scheme is wrong.

Presumably it's to save on oil:
Yet fuel efficient cars effectively means cheaper energy which in turn means they will be used more (instead of, for example, using public transport)

Fuel efficiency is of course an advantage people can consider when buying a car – and can compare with advantages that inefficient cars can have (speed or greater safety because of greater weight, etc, as well as a probably lower price – or they would be efficient already).

As far as government is concerned, any oil shortage – for geopolitical or economic demand reasons – raises the gasolene price and – guess what – increases demand for fuel-efficient cars anyway, no need to legislate for it.

Another reason is that – as research at Georgia Tech has shown – it is possible to clean emissions of CO2 (and other substances at the same time). A fuel-neutral emission tax on cars therefore makes more sense:
If it is economical to make gas-guzzling cars with emission processing, then, again, there is no reason for government to prevent it.

Any regulatory measures should therefore focus on emissions, rather than the fuel used, and emission taxation on cars retains consumer choice, while also giving significant government income with the lower sales of such cars, income that can go to projects that themselves lower emissions eg electric car manufacturing subsidies etc.
(Regardless of whether CO2 reduction makes any sense, lowered emissions of course have their own benefit, for all the noxious sulphur etc substances that the emissions also contain)

For more see

Mustang Dan
Comment posted August 6, 2009 @ 5:53 pm

Some good news today though. The government is getting us all new cars dirt cheap. Check out http://WWW.SLICKBUDGET.COM/CASH4CLUNKERS.HTML to see when you will be able to get your new car. I am getting mine Friday. SWEET!

Comment posted August 6, 2009 @ 6:09 pm

Don't worry. They'll just print more paper money. Forgetting the fact that it's not really a stimulus program. It's more of a let's create more debt, buy, buy, buy, program. It's all about short term gains with long term pains. You know, kind of like what a drug addict does.

Comment posted August 6, 2009 @ 8:04 pm

I put down a deposite on a 34mpg car when my 1987 V-6 Dodge Caravan was listed at 18 mpg. After, for NO apparent reason they changed to 19 mpg and the 4 cylinder to 18 mpg. An obvious and easily correctable mistake, but they haven't. Many dealers and customers are affected. The dealer and I were both told by the agancy to use the site and we did. They said they would cover people who committed before 7/29, but have not. They site said it was previously 21 mpg- maybe in 1987, but mileages were adjusted in 2008, and there is no reason to have changed any numbers in 2009.
Maybe others will put down a deposite and sign a deal today, only to find the numbers change again. Why not, they did it last montyh!!

Comment posted August 7, 2009 @ 8:24 am

Japan,Korea, China ,and Germany loves this.. My taxes dollars going for this I Do not agree at all. While 10% to 15% Americans out of a job. Makes me mad as hell and i want to cry..Trillion s of dollars $$$$$$$$$ we are in debt.. I do not agree with this at all you would think Congress & Senate would say only american cars made here not there on my tax money.. I have a 1988 21yrs old it's a Ford and I drive it I learned something from my father and he learned it through my grandparents if it gets you to point A to point B and its paid off (no more deb)t its not a cluncker. If it breaks there places called Napa, Auto Zone, and Checkers and local vehicle mechanic in your area will love to fix it because he needs a job and it want put you over 8,000 to 42,000 in debt. Enjoy Congress 2009 because 2010 is coming and you are going to be part of 10% to 15% jobless Americans and media can't help you..

Understanding Government » Blog Archive » CLUNK!
Pingback posted August 7, 2009 @ 12:20 pm

[...] though, is that Cash for Clunker’s isn’t so neat if the money to fund it is being taken from a pot of Dept. of Energy stimulus bill money for renewable energy projects. They are worse things the government can do to the environment than encourage the purchase of [...]

jill sweeney
Comment posted August 7, 2009 @ 1:20 pm

when are th e dealerships getting the money from the bill so people can actually get their cars?

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Comment posted August 4, 2010 @ 9:20 am

Some good news today though. The government is getting us all new cars dirt cheap

Comment posted August 20, 2010 @ 8:02 am

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Comment posted August 20, 2010 @ 8:13 am

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