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House GOP: ‘Cash For Clunkers’ Is Wildly Popular, Proving That Government ‘Can’t Run’ Programs

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"House GOP: ‘Cash For Clunkers’ Is Wildly Popular, Proving That Government ‘Can’t Run’ Programs"

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Last night, news broke that the “cash for clunkers” program — which provides vouchers of up to $4,500 to consumers who trade in gas-guzzling cars for more fuel-efficient models — was running out of cash due to much higher than expected demand. It took only six days for the program’s $1 billion budget to be exhausted.

Evidently, Rep. Michele Bachmann (R-MN) feels that a program proving to be more successful than anticipated reveals the government’s incompetence:

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Rep. John Boehner (R-OH) said the same thing, stating that “there are a lot of questions about how the administration administered this program. If they can’t handle something as simple as this, how would we handle health care?”

The initial proposal for the cash for clunkers program included $4 billion in funding, which Congress decided to cut to $1 billion. But besides underestimating demand, it’s hard to see how implementation of this program was mishandled.

The popularity of cash for clunkers actually shows that consumers are willing to spend, if the incentives are there. With the economy as a whole slowing its contraction, but with consumer spending still falling, programs that provide the right incentives (thus causing stimulus and preserving and creating jobs) are a good thing.

As Derek Thompson pointed out, there’s currently an “historic pent-up demand for cars…And when the government sweetens historic demand with cash guarantees, it’s easy to burn through $1 billion in a week.” Some forecasts indicate that industry-wide sales for July “could top 10 million vehicles on the annualized basis tracked by analysts.” If that happens, it would be the highest sales rate of the year.

The House voted today to infuse $2 billion of stimulus money meant for renewable loan guarantees into the program, and the Senate will vote next week. It might be worth finding the money somewhere else, though. For instance, Treasury could reprogram TARP funds, of which there are about $80 billion uncommitted, by making a request to congressional appropriators.

I noted at the time that cash for clunkers is not the most efficient way to upgrade the fuel efficiency of the nation’s auto fleet, and the environmental impact is not going to be huge, but given the economic benefits and the help in combating some traditional pollution the program is worth continuing.

Update

Rep. Michael Burgess (R-TX) piled on:

 

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