Now that the Obama administration has sunk tens of billions of dollars into two of the Big Three American automakers, Democrats have belatedly noticed that car sales are off. How can Congress bolster consumer enthusiasm for upcoming “green cars” that will roll off of the lines at Government Motors? Crazy Nancy wants to offer some big rebates for trade-ins:
With auto sales in the doldrums, the House was considering a plan Tuesday to provide vouchers of up to $4,500 for consumers who turn in their gas-guzzling cars and trucks for more fuel-efficient vehicles. …
Separately, House and Senate appropriators were discussing providing $1 billion to a supplemental war funding bill for the “cash for clunkers” program, which aims to generate about 1 million new auto sales. Since the yearlong vehicle program is expected to cost $4 billion, lawmakers would attempt to find the additional money later this year.
Under the House bill, car owners could get a voucher worth $3,500 if they traded in a vehicle getting 18 miles per gallon or less for one getting at least 22 miles per gallon. The value of the voucher would grow to $4,500 if the mileage of the new car is 10 mpg higher than the old vehicle. The miles per gallon figures are listed on the window sticker.
Autoblog reports that it passed the House already, and notes the conditions:
Although politicians and pundits are sure to weigh-in on the merits of the bill, the specifics appear clear: if your car gets 18 mpg or less and you trade in for a new vehicle the achieves at least 22 mpg, you receive a $3,500 voucher, or $4,500 if the mileage of the new vehicle is 10 mpg higher than your previous heap. SUV, pickup truck and minivan buyers are eligible for a $3,500 voucher if their vehicle gets at least two mpg higher than their trade-in and $4,500 if the vehicle gets five mpg more than their older model. The vehicle has to have been insured for the last year and there is no trade-in value beyond the voucher. The program is also available for leases. Dealers are required to provide proof that the vehicle (1984 MY or later) has been crushed or shredded, and the government estimates that around 25 million vehicles are eligible.
Congress would have to allocate $112 billion in order to fund the rebates for all 25 million cars. That’s more than the combined TARP funds that have already gone to the two automakers. Maybe this would have been a better way to spend the money in the first place, because after around $60 billion, we still have two bankrupt car companies with all the same structural problems as before.
Note, too, that the rebate replaces the trade-in value of your supposed “clunker”. If you have a car still worth $4000 in resale value, the rebate deal gains you nothing at all. For vehicles with better value, you’d take a loss, as well as assuming more debt in a financial environment where debt has been a major problem for consumers.
All this proves is that Crazy Nancy and her colleagues should have stayed out of the auto industry from the beginning.