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Posted by on Aug 4, 2009 in Economy, Politics | 9 comments

Has Tide Shifted For Cash For Clunkers Senate Vote?

Has the tide shifted in the upcoming Senate vote for Cash For Clunkers? There are now rumblings that it has or, at the least, is starting to turn. Here’s one via Reuters:

U.S. Senator Debbie Stabenow, a Michigan Democrat, told Reuters that the Senate may vote as early as Wednesday to approve a $2 billion extension of the popular cash-for-clunkers consumer rebate program to spur automobile sales.

Stabenow said she was “pretty optimistic” that the chamber would approve the additional funding for the program in a bill identical to that passed last week by the U.S. House of Representatives. The Senate is scheduled to recess on Friday for a month-long vacation.

The Senate vote will occur “maybe tomorrow,” Stabenow said in a brief interview.

And, indeed, Senate Majority Harry Reid is reportedly moving to put the issue to a vote this week.

Of course, the program could still wither on the Senate dithering vine.

But there has been a lot of behind the scenes pressure, the Detroit Free Press reports:

The push came as automakers began reporting July sales results showing a sizable boost from the program and touted its environmental benefits, with Ford Motor Co. saying the cars and trucks sold by the plan had 9 m.p.g. better fuel economy on average than the clunkers traded in.

As of midday today, there was no official word that the bill had been added to the Senate’s schedule this week, which was already full of debate over several bills and a scheduled vote on the Supreme Court nomination of Sonia Sotomayor. The Senate is scheduled to adjourn Friday for its August recess.

While the U.S. House moved in a matter of hours to shift $2 billion from a previously approved program into cash for clunkers, the Senate typically requires unanimous agreements to move bills that quickly. With several senators either vowing to object or raising questions about the program, it wasn’t clear how fast supporters might be able to move.

Michigan Sens. Carl Levin and Debbie Stabenow were pressing their colleagues to get the bill moving. A spokesman for Senate Majority Leader Harry Reid, D-Nev., said Democrats were working with Republican Minority Leader Mitch McConnell, R-Ky., to get the bill to the floor.

In a statement, McConnell tied the clunkers debacle to the health-care debate, saying the program was an example of the Obama administration’s “tendency to miss the mark on economic estimates….When the Administration comes bearing estimates, it’s not a bad idea to look for a second opinion,” he said. “All the more so if they say they’re in a hurry.”

The Senate (and Republicans) will be under an even broader kind of pressure: many news reports and editorials are saying the program has worked. In Ohio, Toledo WTOL’s Vice President and General Manager Bob Chirdon said this:

The Cash for Clunkers program did what it was supposed to do: It got shoppers into car showrooms and turned them into buyers.

The program is so successful that the $1 billion dollars allocated to fund it has already been spent. It may even be over budget given the time lag between selling the new car and getting the paperwork approved by the government.

Although I am not a fan of the government managing non-government functions, and I recognize that at its core this program is just moving tax money from one person to another, at least Cash for Clunkers worked. It is one of the few stimulus initiatives that actually stimulated something….

….Maybe Congress will do something else useful and move more of the unspent stimulus money into the Cash for Clunkers program

Given the overall press coverage and voices saying it should be renews, will the Senate (and GOPers) risk short-circuiting something that seems to be having a positive impact?

Here’s a Bloomberg report on a Senate shift on Cash for Clunkers:

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Copyright 2009 The Moderate Voice
  • DLS

    It’s too early to say. I’m also curious if there will be more stringent fuel efficiency requirements in any extension or prolongation. It’s unfortunate as well as obviously wrong, but the Senators have the power to demand this, and Dianne Feinstein (shown by you above) is one of those wanting tougher requirements.

    • If you work out the math, mile-per-gallon improvements obey a law of diminishing returns, so I think that the way they are doing it is very smart — get the worst offending cars off the road for the greatest improvement at the least cost. From a gas consumption and pollution point of view, replacing one 16mpg car with a 25mpg car is like replacing a 25mpg car with a 57mpg car. In other words, you need to spend more money for engine development to get the same amount of return. I think the real trick is not to work only on 100mpg Priuses, but to improve all the big-rigs that get 4mpg to get a whopping 5mpg, for example. Sounds like not much, but a full 5 gallons of gas (+resulting pollution) would be saved for every 100 miles driven. A 1mpg improvement for a 25mpg car would save 5 gallons after 3200 miles.

  • shannonlee

    Totally agree with DLS on this. As DLS mentioned yesterday, the requirements are not stringent enough. Personally, I think anything less that 30mpg should not be allowed. The problem is that 30mpg might cut out a number of American cars….I hate it when I get into a debate with myself.

  • jchem

    Maybe I’m the only one, but something about this whole program just doesn’t set well. Presumably, someone who has one of these clunkers has no monthly car payment and can settle for liability-only car insurance (the cheap kind). They trade that in for a new fuel-efficient car. Now they are stuck with a monthly car payment, and since its financed they now have to pay full coverage insurance on it. This could turn out to be a big problem if someone who buys a brand new car today loses their job tomorrow, no? What happens then?

  • rudi

    I say that with CARS working so well, where is my rebate for a F22 Raptor?

    In April 2006, the cost of the F-22 was assessed by the Government Accountability Office to be $361 million per aircraft. This cost reflects the F-22 total program cost, divided by the number of fighters the Air Force is programmed to buy; and which has so far invested $28 billion in the Raptor’s research, development and testing. That money, referred to as a “sunk cost”, is already spent and is separate from money used for future decision-making, including procuring a copy of the jet. The Unit Procurement Cost was estimated at $177.6 million in 2006 based on a production run of 181 airframes.[17] This unit cost will decrease if total production is higher. This cost includes $3.233 billion already spent on research and development by 2006.[18]

  • DLS

    Rudi, F-22 “sticker shock” (and simply the desire by libbies to loot Defense to pay for other things they prefer to spend money on, instead) is being addressed by current efforts to nip F-22 as well as other projects (including much of FCS, which was overdue). Also, sorry, but GM and Chrysler are too small for you and I and others to enjoy anything meaningful in size when it comes to a “citizens’ dividend” someday.

    * * *

    “As DLS mentioned yesterday, the requirements are not stringent enough. Personally, I think anything less that 30mpg should not be allowed. The problem is that 30mpg might cut out a number of American cars.”

    For the record, I said that _any_ fuel requirements (for either the old or the new car) are wrong, that they wrongly introduce environmentalist and social-engineering elements into what should be free of them, that the program should simply reward replacements of _all_ old vehicles by _any_ new vehicle. (This is the most straightforward thing to do with such a replacement program specifically undertaken to reduce total vehicle emissions, too.)

    But I did say that the world standard (a de facto basis of measurement _and_ a real-world gauge of small personal vehicles of _all_ kinds in the USA and Canada as well as in differently-governed Europe and Japan) for mileage is 23.5 MPG, and that that level is what I’d like to see used for any upward revision from 22 MPG.

    Yes, it’s not very high, but most vehicles’ mileage (of vehicles most people prefer, notably) is not that much higher. The 23.5 MPG figure (10.0 km per liter) is not only real-world appropriate, but practical.

    Even though clouded or tainted by politics, it’s an interesting subject. For example, the 23.5 MPG figure (10.0 km per liter) could be used as an efficiency index (in reality, decameters per liter, too), benchmark-efficiency value of 100, and, say, only those vehicles whose efficiency “index” values were at a specific higher value (125, 150) could be legally called “economy” or “fuel-saving” or “fuel-efficient” vehicles and qualify for various special (politically favored) treatments.

    And there’s no need to wait for that, necessarily.

    Also, the “-bate” portion (subsidy; reward) of a fee-bate scheme could be implemented right away by the feds with this program (Cash for Clunkers), by offering _progressive_ subsidies — the higher the mileage, the greater the subsidy. (An initial attempt at the “fee-” part of the scheme could be done by inverting it, not taxing the less-efficient older vehicle, but inverting this to a progressive subsity or voucher on the old vehicle as well, offering a larger credit or voucher amount the lower the efficiency of the old vehicle being disposed of. I.e., you’d provide fuel-efficiency-seeking progressive incentives with old _and_ new vehicles.)

    More-complicated is inferior normally to simpler with this and any other program, but you can see how the program could be changed from using a single value to a new (raised) efficiency value _and_ applying a varying amount of incentive toward the old and new vehicle to encourage relinquishing the less efficient vehicles and seeking the more efficient vehicles (more than might be the case if not so “incentivized”), as much as possible.

    OK, I’ll take off the social engineering and environmental-activist “hat” now and let others try it on now.

  • DLS

    “Maybe I’m the only one, but something about this whole program just doesn’t set well.”

    There are a number of problems with this. I’m also curious if the Senate will change it.

    Meanwhile, it can’t be all bad, if it spawns more Lincoln Mercury ads featuring Jill Wagner, at least.

  • DLS

    “replacing one 16mpg car with a 25mpg car is like replacing a 25mpg car with a 57mpg car”

    Good point. Possible future variants of the program (be it fixed or variable incentive amounts that may be involved) could be based on relative as well as absolute old-vs.-new fuel efficiency differences and improvements.

  • Almoderate

    Ford’s sales only tell me what I already know…

    The Ford Focus freaking ROCKS! (I have two, and I LOVE them!)

    Back on topic… jchem has a good point. Considering the job loss, that could be a major problem. I’m hoping that the increased spending from this and the recent boost to Wall Street and the increase to minimum wages (not to mention the back to school season spending is under way) that we may start to see the job number improve. Of course, it’s far too early to tell, and it may take some time for the increased spending to translate into hiring to meet increased demand. The real question is whether or not these factors will hold long enough for that to take place and for the spiral to start going back up again. Consumer spending is the key.

    Though I do wonder how this particular program, considering sales tax and liscense fees among other things, might affect the actual cost of the program.

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