H.R. 3435: Making Supplemental Appropriations for Fiscal Year 2009 for the Consumer Assistance to Recycle and Save Program

H.R. 3435

Making Supplemental Appropriations for Fiscal Year 2009 for the Consumer Assistance to Recycle and Save Program

Date
July 31, 2009 (111th Congress, 1st Session)

Staff Contact
Communications

Floor Situation

The House may consider H.R. 3435, on Friday, July 31, 2009, likely under a suspension of the rules requiring a two-thirds majority vote for passage. H.R. 3435 was introduced on July 31, 2009, by Rep. David Obey (D-WI) and referred to the Committee on Appropriations, which took no official action.

Bill Summary

H.R. 3435 would authorize the transfer of $2 billion in funds from the Innovative Technology Loan Guarantee Program in the American Recovery and Reinvestment Act (the "stimulus") for the "Cash for Clunkers" federal program. The program uses federal money to issue vouchers between $3,500 and $4,500 for consumers that buy a new car upon the trade-in of a less fuel-efficient used vehicle.

Background

On June 16, 2009, the House passed H.R. 2346, the Supplemental Appropriations Act of 2009. The bill included $1 billion for the "Cash for Clunkers" program. According to press reports, the program has already expended all of its appropriated funds. H.R. 3435 would take $2 billion from the Innovative Technology Loan Guarantee Program, which received $6 billion in the "stimulus" bill to pay for renewables, electric transmission, and biofuels. The President signed the bill on June 24, 2009.

Over the past 18 months, automobile sales in the U.S. have been on a sharp decline. Car sales in May were down anywhere from 24 to 46 percent from the same month last year for the five largest auto companies in the U.S. Since last year, the U.S. government has spent billions to help keep the troubled auto companies afloat. In December, the Bush Administration loaned $24.8 billion to GM and Chrysler from the Troubled Asset Relief Program (TARP), which was originally designed to purchase troubled financial assets in an effort to help the faltering companies. In an additional effort to help boost car sales, the "stimulus" bill, included a provision that allows individuals to deduct any State tax on a car purchase this year from their federal income tax liability.

As a further response to the turmoil in the auto markets, supporters of the program suggest that the "Cash for Clunkers" program boosts new automobile sales in the U.S. By offering a federal voucher to anyone who trades in a less fuel-efficient car for a new one, proponents of the legislation argue that the bill will increase car sales and help struggling car manufacturers. While the program does not require the voucher to go towards a domestically manufactured car, proponents believe the bill will dramatically help the Big Three by pouring $3 billion of government incentives into the market. Supporters of the program also tout the environmental effects of the legislation. By requiring that vouchers be used on more fuel efficient cars, supporters say that the program would take older, inefficient cars off the road.

Opponents of the program, however, have argued that the legislation merely represents another costly program directed at what are essentially government-owned car companies. They say that the bill could have a number of unintended market consequences. Many argue that the voucher would amount to nothing more than a $3 billion subsidy to prop up auto manufacturers, many of which have already received billions in taxpayer money. Others suggest that by granting vouchers only for the purchase of new cars, and not more fuel-efficient used cars, the program makes it difficult for low-income families to take advantage of the voucher. Indeed, some argue that the voucher will have the adverse consequence of driving up demand for older, cheaper cars that can be used for trade-ins, thereby pricing poor families out of the transportation market. Driving up the cost of affordable transportation in the midst of a recession could be devastating to working families. Others have said that the program-combined with the mass closings of many domestic dealerships-creates an artificial new car market which may temporarily increase car sales, but will dip and flat-line again when the $3 billion taxpayer subsidy expires. Some have also opposed the program because its requirement that trade-ins be crushed would take restorable cars and parts out of the market.

 

Cost

A CBO score for H.R. 3435 is not yet available.