The Blog

House Mulls Saving Broke Cash-for-Clunkers Program for...Two Weeks (Update: House Okays $2 Billion More)

1:03 PM, Jul 31, 2009 • By MARY KATHARINE HAM
Widget tooltip
Single Page Print Larger Text Smaller Text Alerts

The American people act on incentives. When the incentive is free wads of $4,500 for cars that would likely never qualify for such trade-in values on the free market, there will never be enough money to satisfy demand.

That's why the cash-for-clunkers program, meant to incentivize the trading in of gas-guzzlers for energy efficient cars, thereby boosting the flailing auto industry, has been suspended after less than a week. It was supposed to last until November, but lo and behold, when the government offers "free" money, the demand is high, indeed.

WASHINGTON - Four days after it launched, the popular cash-for-clunkers program has burned through its $950-million budget, sending the Obama administration scrambling to find additional money tonight and avoid a shutdown of the program.

Administration officials told Congress this evening that the plan would be suspended, triggering confusion and anger among thousands of dealers and car buyers across the country. Many dealers rushed to submit paperwork on pending trades, amid TV ads from automakers touting the program.

But a White House official denied late today that the program was suspended, and said all valid deals would be honored. Officials at both ends of Pennsylvania Avenue were seeking ways to send additional money to the program; the U.S. House was set to adjourn Friday for a month-long break.

The House is trying to come to the rescue, with $2 billion in stimulus money. That's great. It oughtta keep up with demand for approximately two weeks:

The House will consider $2 billion to fund the fuel efficiency program, which burned through its nearly $1 billion budget after only six days of availability to consumers.

The House will vote on the bill as early as today, according to one House Republican Source. The funds will be drawn from re-directed stimulus funds, though it is not clear which programs will be targeted.

And, then we'll presumably be on the hook for another couple billion after that. But what's another couple billion? Taxpayers have already "invested" billions in the auto industry involuntarily, so why not an arbitrary redistribution of tax money from people who own cars above the 18-mpg "clunker" qualification to people who happen to own '87 Chevy Blazers? I've known people with '87 Blazers. They're good people, and I for one am happy to subsidize their switch from glorious two-tone muddin' machines to...Chevy Bolts.

Many Obama-supporters on Twitter today have argued that the program is only a failure insomuch as it is a great success. You see, the Obama administration simply revealed the tremendous demand for $4,500 hand-outs fuel-efficient cars, and should be congratulated for that. The utter lack of competence, planning, or understanding of incentives is not an indication of the federal government's unsuitability to mucking around in the private sector, but a reason to invite more mucking.

You know what was also a great success, by that standard? The KFC grilled-chicken giveaway. The crowds of angry people, the insufficient chicken supply to honor Oprah-touted coupons, the frayed relations with customers, franchise-owners, media, and the stain on the company's brand? Those were just syptoms of KFC's revelation of the tremendous demand for its free chicken product, not the biggest, most high-profile marketing failure and bad business decision in years.

Michael Barone notes that we've seen this program before:

How much will CfC ultimately cost? The sky may be the limit. The Almanac of American Politics 2002, of which I am co-author, describes a similar program in Arizona: