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House Approves $2 Billion To Extend ‘clunker’ Plan

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http://www.nytimes.com/2009/08/01/business...mp;ref=business

As problems go in the nation’s capital these days, the White House could live with this one.

Officials at the Transportation Department figured Thursday morning that they had applications in hand for about a tenth of the $1 billion that Congress set aside for the “cash for clunkers†program, meant to give rebates to people who turn in old vehicles for new, more fuel-efficient ones.

By late Thursday afternoon, they ran to the White House with news that they might have committed the whole $1 billion, or even more. This stimulus program had, in fact, stimulated very heavy demand, which required a quick decision about what to do next.

Over the course of 24 hours, the White House changed its mind three times. At first, it said it would shut off the incentives by day’s end. Then it let them continue through Friday, and then through Sunday.

On Friday, the House voted to add $2 billion, soothing the fears of car dealers, who would have been responsible for paying any money they promised to customers as a rebate. But the Senate might not follow suit. Some senators said Friday that the speed at which the money flew out the door was a sign that the government’s deal was too good, and perhaps should be modified.

But still, a question remains: What was behind the apparent last-minute run on the clunker fund?

The answer appears to be a bad mix of paperwork and balky computers.

Around the country, dealers had put off the laborious task of applying for the rebates of $3,500 or $4,500, which requires entering the 17-character identification numbers of each vehicle to be scrapped, scanning images of proof of insurance and filling out other paperwork.

The computer system was overloaded, according to the dealers. They said they would finish one page in the application, hit enter and nothing would happen. Eventually a message would appear notifying the dealer that the page had “timed out.â€

Tom Frew, the business manager at Galpin Motors in Los Angeles, said that he needed 35 tries to register just one of the company’s 11 dealerships on the day that the program opened because of problems with the government Web site. On Friday, he spent an hour processing just one rebate application, he said.

“It’s probably anywhere from 30- to 60-second delays between mouse clicks,†he said. Each application can have up to 11 attachments.

But sitting in front of a computer is not the top priority for most of the company’s employees — instead, their job is to “aggressively go out and handle all the customers that are flocking to the showrooms,†he said.

This just goes to show what good govt planning can do.

Thursday morning they have loads of cash, by the end of the day they've suddenly run out of money.

Fantastic these are the sorts of people you need running the country.

And when this subsidy finally ends assuming it's senate approval what do they do? How do they wean the automakers, dealers and consumers off the rebate without collapsing demand.

And once again we see no call for the automakers to cut prices, clearly cars are selling if they price at subsidy levels.

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