President Obama signed into law The Consumer Assistance to Recycle and Save and Act (CARS) H.R. 2751, a.k.a the "Cash for Clunkers" bill, which should go some way toward stimulating new car sales in the U.S.
The measure offers vouchers of up to $4,500 to vehicle owners to trade in their old, gas-guzzling cars and trucks for new models that get better gas mileage. The big auto manufacturers, legislators in big auto-making states and car dealers have all pushed for the plan, hoping that it will boost car sales after seeing such sales plummet 40 percent since October.
Critics note that the $1 billion currently being earmarked for the plan is far short of the full, estimated $4 billion cost of the entire plan. The Detroit News reported that the first $1 billion should pay for the vouchers through Sept. 30, which is the end of the current fiscal year, citing anonymous congressional sources who were close to the negotiations.
Need to Know: The details of getting your "Cash For Clunkers" rebate
|Your Trade-In Car: The old vehicle traded in must get 18 mpg combined or less, have been built in 1983 or newer and must have been registered in your name for at least 12 months.|
|If the new vehicle is a CAR: A new car must have a minimum of 22 mpg combined. If the difference in mpg between your new and old vehicle is 4 mpg - 9 mpg, you receive a $3,500 rebate. If the difference is 10 mpg or greater, you receive a $4,500 rebate.|
|If the new vehicle is a LIGHT DUTY TRUCK: Light duty trucks are considered vehicles such as trucks and SUVs that weigh less than 6,000 lbs. The new light duty vehicle must get a minimum of 18 mpg. If the difference in mpg between your new and old vehicle is 2 mpg - 4 mpg, you receive a $3,500 rebate. If the difference is 5 mpg or greater, you receive a $4,500 rebate.|
|If the new vehicle is a HEAVY DUTY TRUCK: If you're looking to buy a vehicle that weighs over 6,000 lbs (considered a heavy duty vehicle), that truck must achieve at least 15 mpg. If the difference in mpg between your new and old vehicle is 2 mpg - 4 mpg, you receive a $3,500 rebate. If the difference is 5 mpg or greater, you receive a $4,500 rebate.|
Sen. Debbie Stabenow, D-Michigan, who sponsored the Senate version of the "cash for clunkers" bill, was quoted in that report as saying she was comfortable with passing a version of the bill now that assures "start-up" money for the program, with the understanding that the rest of the $4 billion would be approved at a later date.
Some Senators have expressed concern about the amount of funding and the fuel-economy standards for the new vehicles purchased. The Senate version had required higher gas-mileage requirements for the new vehicles.
Congressional leaders had attached the legislation to a $106 billion spending bill to fund troops in Iraq and Afghanistan. The bill passed by a 91 to 5 vote, although some Republican senators tried to strip the "clunkers" measure from the military-spending bill.
One group that is very critical of that part of the agreement is the American Council for an Energy-Efficient Economy. Therese Langer, Transportation Program Director for the ACEEE, points out that, under the plan, a standard pickup truck could qualify with a fuel economy rating 15 miles per gallon -- which is significantly lower than the current Corporate Average Fuel Economy (CAFE) standard for trucks.
"The scrappage bill (originally) introduced in the House in January only offered vouchers to vehicles that met much higher fuel-economy thresholds," Langer said. "But now, the effort is geared toward helping carmakers sell all the vehicles that are sitting on their lots -- even the less fuel-efficient ones."
"People in Congress are tying themselves in knots trying to figure out how to help the auto industry, and the industry does need help," Langer said. "But Congress should design the program to achieve the desired increase in vehicle sales without sacrificing environmental priorities -- and without saddling consumers with gas guzzlers at the taxpayer expense."
"If this goes through as it stands, this was really a missed opportunity," said Langer. "There was never anything that anyone could consider a serious debate on the issue of raising the fuel-economy standards for the new vehicles that can be purchased with the vouchers provided by this bill.
"It's unfortunate that this measure did not go before the Senate as a free-standing bill," she said. "It's been clear from the beginning that the proponents of this bill were looking for any opportunity to shove it through as quickly as possible, and tack it onto whatever bill was moving that week.
"Someone just decided that this measure just had to go through the way it was, so they eventually tacked it onto this military supplemental-spending bill, which everyone thinks of as a 'must-pass' bill."
"But this (cash-for-clunkers) measure continues to be a poorly-structured bill, and I don't see it having much impact if any on the environment, not with the fuel-economy standards set so low."
The program would last through the end of October, and backers say it would encourage the purchase of 1 million new cars and trucks. The plan would be a part of a larger energy bill, which House leaders hope to pass before the Memorial Day recess.
"This 'cash for clunkers' program will help consumers, stimulate our economy, improve our environment, maintain jobs, reduce our dependence on foreign oil, and help our domestic auto and related industries," said Rep. Betty Sutton of Ohio, who originally introduced the House version. "This approach demonstrates that we can achieve multiple worthy goals."
When the measure was first announced, Ford Motor Co. Chairman Bill Ford wrote an opinion column in USA Today, predicting that the program would boost sales by 2.5 million vehicles. The country should "use the tools that our government possesses, and routinely deploys in so many other ways, to help move the economy more swiftly to a better place," Ford wrote.
General Motors spokesman Kerry Christopher echoed those sentiments.
"GM supports this plan, and we urge Congress to move forward quickly to enact this program for the U.S. market," Christopher said. "We hope that it would offer some stimulation in the marketplace, and that's what all of us need right now. It's a good opportunity to stimulate new car sales."
The current plan does not provide vouchers for the purchase of used cars. In addition, auto recyclers don't like it because the clunkers would then have to be crushed.
Backers of the plan are taking their cues in part from nations like England and Germany, where such plans have helped to increase vehicle sales. Earlier this year, a similar program in Germany boosted the nation's vehicle sales by more than 20% in one month alone: Verband der Automobilindustrie, the German auto-industy lobby, declared that a "significant proportion" of buyers traded in old cars for compact and medium-size cars.
But critics of the House plan point to the fact that German consumers were, and still are, taking a much bigger hit at the gas pump than we are here in the U.S. Gasoline prices in Germany were in the $6-per-gallon range at the time -- so German buyers had a much bigger incentive to swap their guzzlers for new, gas-sipping economy cars. Gas prices in most European nations are currently about three times higher than in the U.S.
The consumer migration to smaller vehicles in Germany was also driven by the fact that, this summer, the German government will impose a special carbon-emissions tax on larger vehicles. That means big-car owners in Germany will have to pay fees of more than $1,000, because larger vehicles emit higher levels of CO2.
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