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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.

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Of those foreign cars and trucks, more than half are made in the US. Best sellers include the Toyota Corolla, the Ford Focus, the Honda Civic, and Toyota's Prius and Camry.

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In the end, Cash for Clunkers was too popular to let die. The Senate, after rejecting amendments that would have required the House to revote the bill, voted 60 to 37 to extend the program.

Republican senators put up some resistance, citing this year’s projected $1 trillion federal deficit, but a final vote to pass legislation identical to that already passed in the House was never in doubt. Seven Republicans voted with Democrats to pass the bill.

The Obama administration credits the initial transactions in the program with generating $700 to $1,000 in annual savings for each new-car buyer in reduced gasoline costs alone. “They are getting the oldest, dirtiest, and most air-polluting trucks and SUVs off the road for good,” the president said in a statement after the vote.

Democrats say they will pay for the program by reprogramming funding from the renewable energy loan guarantee program, launched in the 2005 Energy Policy Act. But last week, House Democratic leaders said they would replenish those funds when Congress returns in the fall.

“We’re going to borrow twice to do this program, and both times we’re borrowing from our kids,” said Sen. Judd Gregg (R) of New Hampshire.

Some public-interest groups also caution that the program will need more provisions to protect consumers.

“There should be a lot more to protect consumers and taxpayers in this process,” says Rosemary Shahan, president of Consumers for Auto Reliability and Safety in Sacramento, Calif. “Some dealers are putting into the contract that if a deal is not
approved under Cash for Clunkers, then the consumer must make up the difference. That’s a lot for a consumer.”

On the plus side: “A lot of parents are turning in cars that their teenagers were riding in," she says. "Now, these are new cars with state-of-the-art safety systems, and that’s huge for young at-risk drivers.”