CQ TODAY ONLINE NEWS
– ECONOMIC AFFAIRS
June 5, 2009 – 1:51 p.m.
With Obama’s Support, Congress Speeds Ahead on Car Trade-In Plan
By Paul M. Krawzak, CQ Staff
Congress is about to hit the accelerator on efforts to spur lagging U.S. auto sales, with action scheduled this week on a car trade-in proposal that President Obama has endorsed in concept.
The House is scheduled to vote as early as Tuesday on a bill sponsored by Rep. Betty Sutton , D-Ohio, that would authorize the program. Sutton plans to introduce the final version of her measure Monday. The bill is expected to be considered under suspension of the rules, a fast-track procedure barring amendments and requiring a two-thirds vote for passage.
The bill would offer cash rebates to people who trade in older cars to buy newer, more fuel-efficient vehicles. Sen. Debbie Stabenow , D-Mich., may also introduce identical legislation in the Senate this week as an amendment to a tobacco regulation bill (
Meanwhile, House and Senate appropriators may add about $2 billion to the fiscal 2009 supplemental war funding bill (
The core proposal has gone through several changes during the course of the year.
The latest version being crafted by Sutton and Stabenow includes several changes contained in a measure that Stabenow offered as an amendment to the tobacco bill June 3. The latest version would make the legislation effective on the date of enactment, rather than retroactive to March 30, according to congressional staff. Under the latest draft, vehicles made before model year 1984 would be ineligible for the rebate. The compromise also reduced a fine imposed for violating any provision of the legislation from $25,000 to $15,000.
Bill Aims to Drive Up Cars’ MPG
Sutton, whose Rust Belt district has been hard hit by the loss of manufacturing jobs, including those in the auto industry, introduced her first version (
A modified version was adopted as an amendment to the climate change bill (
Under the version of the plan approved by the House committee, consumers could receive a voucher worth as much as $4,500 for the purchase or lease of a new, fuel-efficient vehicle if they trade in a less efficient passenger car, SUV or truck.
The old passenger car must get 18 or fewer miles to the gallon. To receive a voucher of $3,500, the consumer must purchase a new car that gets at least four more miles per gallon. To receive a voucher for $4,500, the new car must have a mileage rating at least 10 mpg higher.
For a light-duty truck or SUV, the old truck must have a mileage rating of 18 mpg or less. To receive a voucher of $3,500, a consumer must purchase a new vehicle rated at least 2 mpg higher. To receive a voucher for $4,500, the new vehicle must get at least 5 mpg more.
Obama Sees a Jump-Start for Auto Industry
Sen. Dianne Feinstein , D-Calif., introduced an alternative bill (
Obama urged Congress to act on the auto trade-in plan on June 1, when he discussed the twin bankruptcy filings and his administration’s efforts to restructure and revive the domestic auto industry.
He said the government was “accelerating the purchase of a federal fleet of cars to jump-start demand and give the industry a boost at a time when it needs one. And that’s why I’m calling on Congress to pass fleet modernization legislation that can provide a credit to consumers who turn in old cars and purchase cleaner, more fuel-efficient cars.”
Tom Hannett, Joseph J. Schatz and Josh Rogin contributed to this story.
Comments
This bill would put every charity car donation program in the nation out of business since the amount of the voucher would be much greater than the tax deduction. The solution is to simply allow the charity to issue the voucher in lieu of the tax deduction. The charity would then junk the car in accordance with the bill. This way, everyone wins, the car dealer, car maker, car buyer and the charity.
Not including vehicles over 25 years old is a big mistake. It will keep gross polluting vehicles on the road, and will not help stimulate the economy. It also discriminates against the poor who have to drive these vehicles and were hoping that for once their lives, they would be able to buy a new vehicle.
I wonder if anybody has done the math on this cash for clunkers proposal. It is enlightening. 1. $ 2 billion gets you approximately 500,000 more fuel efficient cars, or all of 5% of total US annual demand 2. 500,000 cars is about 0.2% of all US cars 3. If the average improvement in mileage is a whopping 16 mpg to 24 mpg in the cars traded in, then total consumption will drop by a whopping 0.05%. 4, Under reasonable assumptions, the cost per gallon saved under this proposal is $3.76/gallon. In other words, the taxpayer is paying people who want to buy cars $3.76 to save a gallon of gas that is worth $2.50-$3.00 (It's worse than this if you calculate in, as you should, the time value of money). This proposal makes no fiscal sense. It is another "feel good" proposal from Congress. Evan Dudik
In response to comment number one, the people who donate cars and the people who would use the voucher to purchase a new car are two totally separate consumers. There is no crossover there at all. Besides, charities do not operate on a for-profit basis and therefore, as they are a *service*, don't go out of business. Also, you can run the numbers until you're blue in the face but the one factor that mathematics cannot account for is the emotionality of buying and having something new, of the satisfaction of working to pay off a (car) debt, the rebuilding of one's credit rating, the support of the idea that manufacturing is important for any economy...I think that there are a great many positive things that can come from this bill. Also please note that no bill in the history of the US has been perfectly sound. Let's give this one a spin and see if it helps more than it hurts.
It's hard to comment on this Democratic proposal as there is no merit or redeeming value to it's implementation. The "greenies" will love it, even though it has virtually no impact. The sorry A__ American auto industry will grasp for anything but "this ripe for fraud "initiative, will help foreign manufacturers more than what's left of the Big Three. Sorry Jennifer you fail again but sound good as usual
18 mpg for the old junker is far too low. I want to be rid of a 1994 Acura Integra that gets far better mileage than that in lieu of a new car. The 4 mpg difference is also too small. The car I buy to replace it should be my business. Since Toyota makes cars in the USA, their vehicles should be included. Instead, I believe that the individual new car must be made in the USA--too bad USA Toyotas are too large and gas-guzzling for my needs. This will not help me buy a 2010 Prius, but I will just do it anyway. Thanks for nothing, Congress.
Jerry the K, I think this an opportunity for the "Greenies" you seem to hate and small govt. advocates to join forces. I've been riding a bicycle for years, saving gas for the USA's strategic reserves and keeping the atmosphere clean. Where's my $4,500 bucks? Oh, I'm just paying it, because I'm a taxpayer. This idea is obscene. The leaders of the auto industry should be doing something creative
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