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"Win-Win-Win" Cash for Clunkers Extension Passes the Senate

As expected, the Cash for Clunkers extension passed the Senate fairly easily (60-37) with, as the New York Times put it, some senators having "smelled the gas fumes." There will now be an additional $2 billion in the program, which should last at least another month.

There was not a clear ideological split evident in the Senate vote: though the "nays" included far more Republicans than Democrats, they also included such relative moderates and liberals as Patrick Leahy (D-VT), Claire McCaskill (D-MO), John Warner (D-VA) and Ben Nelson (D-NE).

Senator Chuck Schumer (D-NY) proclaimed the vote as a "win-win-win," with the beneficiaries including families looking to buy new cars, auto industry jobs and the cause of reducing foreign oil dependence. President Obama noted that the initial transactions have generated a more than 50 percent increase in fuel economy, and that they are generating annual $700 to $1,000 gas savings for participants. "And they are getting the oldest, dirtiest and most air-polluting trucks and SUVs off the road for good."

The lopsided vote reflected the clear impression--among automakers as well as the general public that (despite a good deal of confusion) the high-profile program is doing what it is supposed to do: take guzzlers off the road and get cars out the showroom door. People may be confused by the rules, but they sense a bargain.

"Cash for clunkers is a new engine for automakers; a tune up for the environment; and a jump start for communities across the country whose economies are dependent on a strong auto industry," said Dave McCurdy, CEO of the Alliance of Automobile Manufacturers.

The story so far: Dealers have made approximately 250,000 transactions (definitely spending the entire $1 billion initial funding), but only 180,000 (representing ($775.2 million) have made it into the government's computers. More than half the cars bought under the program were foreign, reflecting Detroit's need for more small, fuel-efficient cars (though many are in the pipeline). The average fuel-efficiency improvement was 9.6 mpg, though if the clunker going to the junkyard was a second or third car the actual gas savings are somewhat less than that would imply.

The Wall Street Journal reported today that the program is continuing to evolve, and that's a factor in increasing public confusion over it. For instance, a federal review means that some cars judged non-eligible as clunkers (the 1989 Taurus and Mercury Sable station wagons, for instance, and the 1993 Acura Legend) now qualify; and some cars that formerly made the grade are now off the list (the 1991 Toyota Camry and wagon, and the 1987 Lincoln Town Car). The updates are available on the program's official website.

The Journal report also cautioned that the voucher isn't a "rebate," it's a trade-in, so if you can find a better deal in the private sector you should go for it (a point I'd made earlier at CBS Moneywatch).

I was on Fox5 in New York yesterday debating the clunkers extension, and the negative voices on our panel echoed some comments in Congress in asserting that this was just another deficit-busting government handout. Maybe so, but it's probably the handout with the clearest evidence of success.

Photo: Jim Motavalli