Heh heh heh. Those jokers in the Senate really have a sense of humor.
In case the savage recession has disarmed your funny bone, here's the joke: Congress has come up with $700 billion to rescue rich bankers on Wall Street and nearly $800 billion in dubious "stimulus" spending. Bailing out Chrysler and General Motors alone has cost $80 billion. Compared with all that, the "cash for clunkers" program is an afterthought, a tiny $1 billion program meant to goose car sales and get a few rattletraps off the road.
While we wait to see if the megabailouts work, however, cash for clunkers has turned out to be the first rescue program with demonstrable, real-time results. In less than a week after the program kicked off, C4C, as it's known, helped boost car sales by about 250,000, transforming July from another depressed month for the automakers into something to cheer about. Government giveaways don't represent a healthy economy, and some of those sales were to people who would have bought a car later this year anyway, without the rebate. But C4C has been so popular that buyers have already claimed $1 billion worth of rebates, exhausting funds that were supposed to last until November. The White House has now asked Congress for $2 billion more to continue the program.
The House passed a bill providing the funds before it left Washington for its August recess. The Senate, however, needs to think it over. After all, $2 billion is a lot of money. It could be used to pay bonuses to 10 or 20 bankers or to prop up AIG or Citigroup for another week. There are still plenty of failing companies that would love to burn through $2 billion in federal funds. Or the $2 billion could be used to reduce the cost of healthcare reform by 0.2 percent.
But it won't. The Senate will come up with $2 billion to fund more clunker rebates, but first there needs to be an anxious waiting period while the august upper chamber proves how important it is. Nobody rushes the Senate, you see. They're studious and deliberate up there. It doesn't matter if car buyers are confused and dealers are dismayed. Front-page newspaper stories that make the politicians look like dithering doofuses won't change anything, either. If 100 senators want to stroke their chins for a week, America will just have to wait.
[See why GM is ready to rebound.]
But what the senators won't do is go back home for the summer recess with the burden of explaining why they approved billions for bankers but shut off rebates for car buyers. The bailouts are already unpopular, mostly because they went to only a privileged few. Some ordinary consumers are finally getting a bit of a bailout, and the backlash would be severe if Congress suddenly shut them off. Sure, $2 billion is real money, but if you're a senator, it's a cheap way to keep all those car dealers and their customers in your state happy.
So cash for clunkers is likely to be with us for the foreseeable future. By the fall, it could even be expanded beyond the extra $2 billion the White House wants now. Research firm CNW Marketing Research estimates that up to 1.2 million people may be in a position to take advantage of the program, with about 725,000 ready to do so this summer. The controversy over the program could expand that pool even more, since it has raised the visibility of the rebate scheme and gotten the attention of people who might not have known about it. If the first $1 billion triggered about 250,000 car purchases, that suggests an additional $4 billion or so in funding could tap everybody looking for a clunker rebate.
If the whole C4C program swelled to $5 billion, that would represent about .05 percent of all the money the government has spent, lent, or pledged since last year to get the economy back on track. The entire point of all that spending is to coax consumers to spend money again and make sure the financial system supports their ability to do so. Like it or not, we finally have a stimulus program that's stimulating something. And Congress is going to kill it? Now that's a good one. Ha. Ha. Ha.
For the time being, some car buyers who already made a clunker deal are waiting for Washington to officially approve the rebate, so they can drive their new car off the lot. Others who want to trade in a clunker are sitting on the sidelines, waiting to see if Congress comes up with additional funding. If it doesn't, that will be astonishing. And the next set of clunkers eligible for a trade-in will be members of Congress themselves.
[See if you qualify for a Cash for Clunkers rebate.]