US Cash-for-Clunkers roars to finish line
The US government's "Cash-for-Clunkers" program to boost auto sales roared toward the finish line Monday, spurring more than two billion dollars in sales and concern about government spending.
The program is expiring less than a month after its launch, a victim of its own popularity, at 8:00 pm (0000 GMT Tuesday), the department announced last Thursday.
President Barack Obama's administration pulled the plug on the program to prevent car dealers and shoppers from claiming more than the 3.0 billion dollars Congress approved for the hugely successful program.
It gives car owners up to 4,500 dollars to trade in a gas-guzzler for a new fuel-efficient vehicle.
When Transportation Secretary Ray LaHood kicked off the Car Allowance Rebate System (CARS), the official name of Cash-for-Clunkers, on July 27, the program was expected to generate 250,000 vehicle sales through November 1, "or until the money runs out."
As of Monday morning, the program had generated 625,000 applications for vouchers totaling 2.58 billion dollars, a Department of Transportation official told AFP.
The program, begun with one billion dollars that was quickly snapped up by car-hungry consumers, was extended less than two weeks later with an additional two billion dollars allocated by Congress.
The plan is modeled on programs in France, Germany, Italy and Spain, which have had success, although some US critics argue it adds to government debt and merely speed up sales that would have occurred anyway.
Carmakers have ramped up production, boosting jobs and income and spending flowing in the economy.
However, analysts say the larger effects of the plan on the economy and environment will be long debated. It also has generated many complaints from dealers who say the government has been slow to reimburse them.
"Whatever its problems cash-for-clunkers certainly will be credited for injecting life into auto showrooms that had been moribund until the program began in late July," Bill Visnic at Edmunds.com said Monday.
Visnic pointed out that the industry's seasonally adjusted annualized rate of sales (SAAR) had struggled all year to broach the 10-million mark.
Even before the transaction details for the program's last weekend can be assessed, he said, Edmunds.com is projecting the SAAR for the final weekend of the cash-for-clunkers program to be 15 million sales.
And the last-chance final weekend was expected to generate an August sales rate of 13.0 to 13.5 million, according to Edmunds forecasters.
Some analysts warn that the federal program borrows money that will have to be repaid in the future with interest.
David Rosenberg, chief economist at Gluskin Sheff & Associates, has criticized the plan for "perpetuating the spending and borrowing cycle."
"Shouldn't they be focusing their attention on health, education, defense, infrastructure, public safety, job skills and productivity growth ... These rebates are not manna from heaven -- it's a future tax liability to hasten a decision that the auto buyer would have made in any event."
The Cash-for-Clunkers program winds up ahead of the Obama administration's latest 10-year budget projection, expected to show a large rise in the budget deficit.
The update on the 2010-2019 budget, expected to be reported by the White House's Office of Management and Budget this week, will raise the deficit by about two trillion dollars to approximately nine trillion, an OMB official said Friday, speaking on condition of anonymity.