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Cash for Clunkers is popular, but is it truly a US stimulus?

Detroit has not said whether it will boost auto production now that Congress has allotted $2 billion more to the program.

By Staff writer / August 7, 2009

A sign promoting the clash for clunkers program is seen outside a car dealership in San Jose, Calif., on Tuesday.

Marcio Jose Sanchez/AP

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Washington

With an additional $2 billion in funding, the "Cash for Clunkers" program has a new lease on life until Labor Day. But it’s not clear if Clunkers, the sequel, will show the same robust results that the program did in its first week, quickly running through the $1 billion that was supposed to last until November.

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The biggest wild card is whether US automakers will step up production to meet new demand, as the White House and congressional Democrats say they expect. So far, none of the Big Three – General Motors, Ford, or Chrysler – has committed to ratcheting up production levels or new hiring.

“Businesses across the country – from small auto dealerships and suppliers to large auto manufacturers – are putting people back to work as a result of this program,” asserted President Obama in a statement Thursday, after the Senate approved more funding for Cash for Clunkers.

While the program is popular with dealers and, certainly, Americans who've tapped it, questions remain about its true stimulative effect on the economy.

“This has been a relatively successful program in pushing some auto sales. But it’s not clear this is real stimulus, especially if people have been delaying their sales in anticipation of this bill,” says Lena Pons, a policy analyst for Public Citizen’s Congress Watch division.[Editor's note: The original version misspelled Pons's name.]

The Consumer Assistance to Recycle and Save (CARS) program, the official name for Cash for Clunkers, offers consumers up to $4,500 to trade in gas guzzlers for new cars or trucks with better efficiency. Originally slated to end in November, the program ran out funds in its first week.

CARS vouchers in Week 1 helped consumers buy 184,304 new vehicles, more than half of which were foreign makes, mainly Toyota, Honda, Nissan, and Hyundai, according to the US Department of Transportation.