Aug 06 2009

SHELBY: Cash-for-Clunkers --Just Another Billion Dollar Auto Bailout

Senator Richard Shelby (R-Ala.) today delivered the following statement on the floor of the U.S. Senate opposing the Cash-for-Clunkers program.

Click here to view a video of Senator Shelby’s statement.

The prepared text of Sen. Shelby’s statement is below.

“Madame President, one week after commencing the $1 billion Cash-for-Clunkers program, it is so popular, that it has used up all its funds.

“Could it be that through this program – which entices car buyers with up to $4,500 to trade in their old cars – the government has finally devised a smart way to stimulate the economy?

“In a word, Madame President, no.

“Instead, the federal government has sent another $1 billion of taxpayer funds into the economic abyss. 

“It has robbed Peter, to pay Paul, to give a kick back to the automotive industry.

“Madame President, advocates of the Cash-for-Clunkers program state the additional $2 billion in funding is necessary because the program is such a great success. 

“Of course it is.  Who does not want free money?

“The Cash-for-Clunkers program is simply another bailout to prop up a struggling industry wrapped in the political guise of an environmentally friendly program. 

“While I agree that there are benefits to getting older, less fuel-efficient vehicles off the road, do not be fooled. 
“That is not even what this program accomplishes.

“Let me explain. 

“Under the Cash-for-Clunkers program, it does not matter how big a difference in gas mileage there is between the car you are trading in and the car you are buying. 

“The trade-in must only meet the 18 miles per gallon requirement to be considered a clunker. 

“After that, Madame President, environmental concerns end.

“As a result, under the Cash-for-Clunkers program, replacing an 18 miles per gallon vehicle with one that offers 22 miles per gallon gets a subsidy. 

“But you do not receive any federal funds if you replace a 19 miles per gallon vehicle with one that gets 40 miles per gallon.

“If improving gas mileage is the goal, then a sliding scale that adjusted the subsidy with the difference in gas mileage between old and new cars would seem reasonable.

“Or if reducing emissions from older cars is the objective, the subsidy could be larger for trading in older vehicles.

“The Cash-for-Clunkers program does not do either.

“So, if there are no significant environmental benefits, then the goal must be to help stimulate the economy.

“Yet, Madame President, the program has done little to actually stimulate the economy. 

“Many of the individuals taking advantage of the program’s subsides are not new car buyers spurred by this incentive package, but instead those who put their purchase on hold waiting for the program to launch. 

“Madame President, simply put, these buyers would have bought the car anyway.

“Edumunds.com, a noted online site for car sales, stated this number could be over 100,000 car buyers.

“Further, Edmunds also published an analysis showing that in any given month, 60,000 to 70,000 “clunker-like” deals happen with no government program in place. 

“Therefore, the 200,000 deals the government was originally prepared to fund through the Cash-for-Clunkers program were likely the natural “clunker” trade-in rate.

“This program squeezed months of normal activity into just a few days. 

“When the backlog is met, interest in the program will fade, and the façade of economic benefit will disappear.

“Madame President, the Cash-for-Clunkers program is a shell game of transferring wealth from the pockets of one taxpayer to another. 

We should call it what it really is – another billion dollar auto bailout.

“This program is little more than a clunker itself.

“Thank you, Madame President.  I yield the floor.”