Auto Trade-In Program No Easy Sell
By Shailagh Murray
Congress isn't sold on the "Cash for Clunkers" idea just yet.
House and Senate Democrats have encountered early obstacles in meeting President Obama's call for a new incentive to encourage people to trade in aging automobiles for new, more fuel-efficient models. Lawmakers aren't sure they can fund the potentially blockbuster program, for one, and also are running into potential international trade concerns.
The incentive idea has been circulating for weeks but got a major boost this morning when Obama endorsed it as a way to reduce pollution while bolstering ailing U.S. automakers General Motors and Chrysler. House and Senate leadership aides said White House officials want to redirect funds from the $787 billion economic stimulus bill to pay for a trade-in program that would take effect immediately.
"Such fleet modernization programs, which provide a generous credit to consumers who turn in old, less fuel efficient cars and purchase cleaner cars have been successful in boosting auto sales in a number of European countries," Obama said in his White House speech.
Backers include Democratic representatives from Ohio and Michigan, who pressed for the president's support during a Sunday night conference call with administration officials. Participants in the call said several lawmakers became distraught when they learned Obama would force both carmakers to meet strict restructuring standards before receiving further government aid.
"The Midwestern lawmakers were really upset and pleaded with the administration to address the demand side," said one Democratic official who was briefed about the call.
One proposal on the table, sponsored by Rep. Betty Sutton (D-Ohio) and supported by House Speaker Nancy Pelosi, would provide vouchers valued at $3,000 to $5,000 for individuals to trade in high-polluting cars that are at least eight years old, for new cars with a fuel efficiency rating of at least 27 miles per gallon the highway, or 24 miles per gallon for new trucks. U.S. auto sales have declined by over 40 percent in the past year, slowing production and creating a vast backlog of new inventory.
A similar program in Germany saw new car sales increase by 21 percent in February, Sutton noted.
But funding the vouchers is proving a major challenge. Democratic aides said Congress would have to reprogram funds from the stimulus bill, ensuring a battle with proponents of whatever measures are targeted for cuts.
Also, Sutton's bill -- which appears to be the White House favorite, at least for the moment -- would apply only to new cars that were assembled in the U.S. That caveat may violate World Trade Agreement rules, said Democratic aides, who noted that Germany made a similar discovery while creating its incentive program. And yet, if the Sutton legislation is expanded to include all vehicles, many lawmakers would likely balk at subsidizing foreign automakers.
Finally, car industry officials and United Auto Workers representatives have raised concerns with lawmakers that Congress will set fuel efficiency levels too high, exempting larger cars and sports utility vehicles that are creating much of the supply glut. But setting the levels too low would minimize the incentive's environmental benefits.
"Obviously, there will be renewed interest in this proposal with the president's endorsement today, but it is too early to assess the viability of legislation in this area," said a senior Senate Democratic leadership aide.
Web Politics Editor
March 30, 2009; 6:27 PM ET
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