'Cash for Clunkers' Suspended? Funds Already Running Out

The House scrambles to put the wheels back on the program before August recess.

ByABC News via logo
July 31, 2009, 7:19 AM

July 31, 2009— -- Congressional leaders scrambled today to find a way to keep the wildly popular Cash for Clunkers program up and running after heavy demand threatened to dry up the $1 billion set aside for the initiative.

White House spokesman Robert Gibbs said Friday that for now, the program that gives cash vouchers to people who trade in their gaz guzzling cars, "is up and continuing to run."

Reps. Sander Levin, D-Mich., and Betty Sutton, D-Ohio. announced Friday they will introduce legislation to provide an additional $2 billion into the program, and hope to get it passed by the House today, the last day before the House August recess begins. The Senate remains in session through the end of next week.

The "Cash for Clunkers" program was designed to help the struggling auto industry by giving owners of old cars money toward the purchase of a new, more fuel-efficient vehicle. But now the program appears to be running out of gas. It looks as if the money to buy up used cars has already been used up.

The White House announced late Thursday it was reviewing the program, denying earlier reports that "Cash for Clunkers" was being suspended. The conflicting announcements created confusion for buyers and car dealers alike.

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"Cash for Clunkers" was supposed to continue through Nov. 1, 2009, or until the money ran out. But with the number of dealers participating, if each completed just a dozen cash for clunkers deals, the $1 billion would be spent. And some dealers have initiated more like 250 "Cash for Clunkers" deals -- 20 times what the government was expecting.

At Fitzgerald Toyota in Gaithersburg, Md., it's a different kind of car race as the sales staff rushes to process "Cash for Clunkers" transactions before the government slams the brakes on the program.

"It was the right idea, but it was the cart before the horse," said Scott Addison of Fitzgerald Auto Mall.

Thursday evening the Department of Transportation told lawmakers it was suspending the "Cash for Clunkers" program at the stroke of midnight. But then later the White House said it was still working to find other options.

"We are working tonight to assess the situation facing what is obviously an incredibly popular program," Gibbs said of what officially is called the Car Allowance Rebate System. "Auto dealers and consumers should have confidence that all valid cars transactions that have taken place to date will be honored."

Confusion reigned. The official Web site http://www.cars.gov showed there was still $779 million left -- clearly not the case.But the Web site was still up and apparently running Friday morning.

Even "Cash for Clunkers" commercials are still running for a number of automakers.

Part of the problem? The government Web site dealers must use to enter clunker deals is a clunker itself, sputtering and stalling.

The computer crashes have caused a backlog: as many as 25,000 transactions that dealers have made but the government hasn't yet officially approved.

"They think they've given out this much, but there's a line this long trying to get in the door," said Addison.