Pat Dollard

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Financial Times:

The Obama administration’s oversubscribed “cash for clunkers” scheme looks likely to founder in the Senate this week as bipartisan opposition mounted on Monday to the $2bn extension passed last week in the House of Representatives.

Republican senators described the scheme, in which car users can take up to $4,500 (€3,170, £2,710) in government vouchers to trade in their vehicles for more fuel efficient ones, as a “boondoggle” – or a waste of time and money – and all but threatened to filibuster the planned extension. This would almost certainly kill prospects of renewing the scheme before the Senate returns from recess in September.

Republicans also pointed out that the administration had originally estimated the first $1bn in funding would last until November. Instead it is expected to run out in the next few days. “When the administration comes bearing estimates, it’s not a bad idea to look for a second opinion,” said Mitch McConnell, the Senate minority leader. “All the more so if they say they’re in a hurry.”

Prospects for overcoming a Republican filibuster were also dealt a blow on Monday with objections from a number of leading Democrats. Dianne Feinstein, the senator from California, and Chuck Schumer, the New York senator, both want to raise the fuel efficiency standards of the subsidised vehicles, 250,000 of which have now been funded.

Meanwhile, Jeff Bingaman, the senator from New Mexico, objected to the diversion of funds from the $6bn allocated to the Department of Energy under the $787bn stimulus programme in February. It is unclear whether the administration could find other sources of cash to extend “cash for clunkers”, or whether it could move ahead without congressional approval.

Hopes for an extension were complicated by the limited time available before the Senate goes into recess at the end of the week. It is also set to vote on Sonia Sotomayor, Barack Obama’s nominee for the Supreme Court, on Tuesday or Wednesday. And Harry Reid, the Senate majority leader, who faces re-election next year, plans a vote on a tourism promotion bill for his home state of Nevada this week.

Furthermore, if the $2bn extension did pass this week but contained even the slightest alteration to the House bill, the two versions would have to be reconciled and the lower chamber is already in summer recess. “My guess is that this is highly unlikely to move forward before the end of the week,” said a spokesman for a senior Democratic senator.

However, most analysts believe the scheme’s longer-term prospects look much brighter even if it is forced into mothballs for a few weeks.

Since both foreign and US cars are eligible, it has political support from the south, where foreign carmakers are based, and from the rustbelt, where US car manufacturing is based.

In addition, it is evidently popular with the voters. “Most politicians wouldn’t want to stand between a speeding car and free cash,” says Kevin Book, an energy analyst in Washington. “For politicians it is ideal: an industrial policy with quick payout to the voters.”