Tenative "Cash for Clunkers" Compromise

"Cash for Clunkers" continues to wind it's way through Congress, with the latest news coming of a compromise between the U.S House of Representatives and the Obama administration.

Some of the last news we heard was around April 26th, when news of an agreement being hammered out between the two competing bills in Congress. The two sides, one led by  Rep. Betty Sutton’s (D-Ohio) HR. 1550 with her Customer Assistance to Recycle and Save (CARS) Act and the other Rep. Steve Israel (D-NY) with his HR. 520, The Accelerated Retirement of Inefficient Vehicles Act of 2009 were supposedly "90 percent" of the way to a compromise.

The new compromise garners the backing of Michigan's representatives and other automakers that might have worked to block it's passage. Under the compromise bill, it would offer vouchers for one year for up to one million people. The vouchers could be applied to cars, truck and even work vehicles. Old cars and trucks would have to get less then 18 miles per gallon in combined driving to be eligible under the program.

The compromise bill has some key differences though. The other one had quite stringent mileage requirements for purchasing a new vehicle. If the new vehicle replacing the trade-in achieved 22 mpg, it would qualify for a $3,500 voucher. If the new model got 10 more mpg then the old one (28 mpg), that voucher would increase to $4,500.

For trucks, new ones would have to get at least 18 mpg and get at least 2 mpg better then the old one to qualify for a $3,500 voucher. 5 mpg better gets you a $4,500 voucher. The compromise seems to exclude any "Buy American" provisions that would be so beneficial in helping the domestic automakers getting back on their feet. Or if that wasn't palatable, the market share based solution where subsidies are doled out according to market share.

Love it or loathe it, if this bill is going to be enacted (which it will be) it better do the most good for our economy. Money for the program is set to be carved out of the Economic Recovery Act. Hang tight! More details should be forthcoming.