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Cash for Clunkers Means 'Ca-Ching' for Detroit

A Commentary By Froma Harrop

Tuesday, August 04, 2009

This is what I told my friend Frank: Under the "cash for clunkers" program, you could get more money for your '93 Mercury Grand Marquis than it was worth -- up to $4,500 if you used it to buy a new vehicle with much better gas mileage.

"What would they do with the Merc?" Frank asked.

"Throw it in the hopper," I responded.

"You mean, destroy it?"

"Yeah."

No way. The big red Marquis was his steed -- swift as Secretariat, companionable as Mr. Ed. Would Roy Rogers let Trigger be ground into hamburger?

But when Frank saw how quickly others grabbed the deal -- the $1 billion Congress allocated for the program was used up in a week -- he thought again. He may have another chance, if the program is extended, which, as I type, seems very likely.

Cash for clunkers could be the least glamorous stimulus program ever devised -- and among the best designed. It is Temporary (lasts until Nov. 1 or when the money is gone), Targeted (helps Detroit and, with it, the industrial heartland) and Timely (the stampede to the showrooms was immediate). Extra bonus: By helping people trade gas guzzlers in for more fuel-efficient vehicles, the program helps the environment.

The possibility that this popular program will make Obama's economic policies look good has put many Republicans (though not Michigan's) in a bad mood. Sen. Jim DeMint, R-S.C., characterized it as "stupidity coming out of Washington right now." Sen. John McCain, R-Ariz., threatened to filibuster efforts to put $2 billion more into the program.

On the other hand, Rep. Candice Miller, R-Mich., wrote, "This is simply the most stimulative $1 billion the federal government has spent during the entire economic downturn." She added that "the federal government must come up with more money, immediately, to keep this program going."

Miller is correct.

Motorists across America have been bringing in their guzzling Lincoln Town Cars and Nissan Frontiers and driving off with brand-new Ford Focuses. Thanks to the program, Ford on Monday reported its first monthly year-over-year sales gain since 2007.

The dealerships are obviously happy. The program has already touched off 250,000 in potential new sales. The National Automobile Dealers Association reports huge backlogs of applications awaiting approval by the National Highway Traffic Safety Administration, which oversees cash for clunkers.

Some critics say that the program may have just pushed people who planned to buy new cars anyway to simply move their purchases forward.

There could be something to that, but to be timely, economic stimulus must happen now , not in the future.

And the program has undoubtedly provided a psychological boost that has translated into additional new business. Dealers report that many curious people who visited their showrooms, even upon learning that their vehicles didn't qualify (they must get 18 miles or fewer to the gallon), succumbed anyway. And some non-clunker owners may be overcome by the new-car smell wafting from their neighbors' driveways and join the party.

When it comes to the lure of new cars, I, unlike Frank, am one of the weak ones. I tried to sell him on some of the added benefits of trading in the Grand Marquis for a younger model: a cigarette lighter that works, iPod integration and a GPS device with a silky female voice telling him, "In 200 feet, turn left."

One last point: All this finger-wagging over the cost of this program is ludicrous. The federal government spends more than $3 billion in half a day. This program is actually doing something for both the economy and for ordinary Americans. Don't hold that against it.

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