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“Cash for Clunkers” Sputters Along in Congress

Fleecing the taxpayers or a fleet upgrade that's good for all?

by on May.06, 2009

Clunkers is tied up in a much larger fight over an energy bill.

Clunkers is tied up in a much larger fight over a clean energy bill.

House Democrats from the Committee on Energy and Commerce have finally agreed a compromise bill that would provide billions of dollars in taxpayer-financed incentives to vehicle buyers who trade in older vehicles for new ones. Buyers would receive a coupon, worth $3500 or $4500, if the new vehicle is more fuel efficient than the one replaced.

The program could cost taxpayers as much as $4.5 billion during the year it would run, if all one million of the authorized coupons are cashed in. The money would come from the economic stimulus plan already approved by Congress.

The bill does not, apparently, require any financing from the very automakers that would benefit the most from it. A similar program in the United Kingdom requires an automaker match, as TDB has reported.  And unlike earlier versions of the bill, all vehicles built in the U.S. would be covered.

Still, many details need to be worked out; and as many questions remain about the soundness of the bill, as do obstacles to its passage: For example, does U.S. built mean that, or would it include vehicles built in Canada and Mexico under the North American Free Trade Agreement? Are imports really ineligible? Would high-priced luxury vehicles be covered? What of used cars that are fuel efficient, could the vouchers used for their purchase?   (more…)