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Senate Must Demand the Facts Before Approving More Cash for Clunkers

July 31, 2009 

Senate Must Demand the Facts Before Approving More Cash for Clunkers

Statement of Lena Pons, Policy Analyst, Public Citizen’s Congress Watch Division

Reports that the $1 billion cash-for-clunkers program has already run out of money raise serious questions about the program’s oversight and accountability. The reports are based solely on a dealer survey of estimated backlogged transactions, not a count of transactions that have been received and processed by the National Highway Traffic Safety Administration (NHTSA).

The House of Representatives just passed an emergency bill to approve $2 billion to continue the program. This is extremely misguided. It would be a grave error to rush additional funding to this program — which is by no means urgent — based solely on self-serving reports of automobile dealers, who stand to gain most from the program.

Even if current “cash-for-clunkers” funds in fact have been exhausted, the Senate should not rush to provide additional funding. It is not surprising that a large number of people would claim $4,500 handouts to buy new cars. This is not an indication that the program is meeting its actual goals—reducing harmful emissions and stimulating the economy. Before appropriating any additional funds, the Senate should take the time to study whether the program is working. This means at a minimum that NHTSA must release information on the following:

• The average fuel economy improvement between traded-in and purchased vehicles;
• What fraction of the transactions resulted in the purchase of new light trucks, maintaining the current fleet mix;
• How many people purchased a vehicle because of the incentive, compared to the number who would have purchased a new car without it; and
• Whether the old cars were actually being driven much at all, or their owners merely received a windfall for trading them in even though the trade did not reduce harmful emissions.

The speed with which these funds may have been exhausted underscore the need for real-time information about the transactions, so that analysts can ensure that the program is working — and Congress can ensure it is funding an effective program, not just giving a multi-billion dollar handout.