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Is "Cash for Clunkers" a Clunker of a Bill?

Democrats have finally agreed on a vehicle scrappage bill that backs off some of the protectionist, Big Three-promoting aspects of HR 1550, introduced by Representative Betty Sutton (D-OH). But it's controversial anyway, because it allows American car buyers to get substantial environmentally based subsidies on 15-mpg trucks that could hardly be called "green."

Under "cash for clunkers," which is being folded into the omnibus--and sweeping--Waxman-Markey climate legislation, consumers could get a voucher worth $4,500 toward the purchase of a passenger car with at least 22 mpg that improved on the fuel economy of their old one by 10 mpg. A four-mpg improvement would yield a $3,500 voucher.

The program applies to both U.S. and foreign-made new vehicles. It lasts only for one year, and is capped at a million vouchers so the cash outlay (to be taken from the stimulus package) won't exceed $4.5 billion.

The requirements for trucks are very lenient. The owners of large 6,000 to 8,500-pound trucks could get a $3,500 voucher toward the purchase of a vehicle with at least 15 mpg if it's only one mpg better than the truck they're replacing. A two-mpg improvement scores a $4,500 voucher. A 15-mpg truck fails the simple test of meeting the federal Corporate Average Fuel Economy (CAFE) standards.

Light trucks have to get at least 18 mpg, and a two-mpg improvement will yield the $3,500 voucher; five-mpg a $4,500 one.

The American Council for an Energy-Efficient Economy says the scrappage program "needs repair." According to Therese Langer, ACEEE's transportation program director, "I can't see using taxpayer dollars to sell a Hummer H3T [which meets the 15-mpg large truck threshold]. We would welcome incentives to retire gas guzzlers and encourage the purchase of efficient vehicles, but the proposal just isn't there yet."

Opposition has also arisen from a wholly different sector: classic car hobbyists, who have traditionally opposed "cash for clunker" legislation because the laws take potential parts vehicles out of circulation. The Hagerty insurance agency, which sells classic car policies, describes federal clunker bills as "a misguided attempt to spur new car sales."

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