Cash for Clunkers ends, cash for appliances coming soon

The $3 billion “Cash for Clunkers” program officially ends today, having helped generate at least 625,000 new car sales. Representative Bruce Braley, a key advocate of the program, is holding an event this morning in Bettendorf with John McEleney, Chairman of the National Automobile Dealers Association, and Gary Thomas, President of the Iowa Automobile Dealers Association.

Meanwhile, Energy Secretary Steven Chu has announced that $300 million in stimulus money will go toward cash incentives for consumers to buy energy-efficient home appliances:

Beginning late this fall, the program authorizes rebates of $50 to $200 for purchases of high-efficiency household appliances. The money is part of the broader economic stimulus bill passed earlier this year. Program details will vary by state, and the Energy Dept. has set a deadline of Oct. 15 for states to file formal applications. The Energy Dept. expects the bulk of the $300 million to be awarded by the end of November. (Unlike the clunkers auto program, consumers won’t have to trade in their old appliances.)

“These rebates will help families make the transition to more efficient appliances, making purchases that will directly stimulate the economy,” Energy Secretary Steven Chu said in a statement announcing the plan. Only appliances covered by the Energy Star seal will qualify. In 2008, about 55% of newly produced major household appliances met those standards, which are set by the Energy Dept. and Environmental Protection Agency.

Replacing old appliances can significantly reduce a household’s energy use and utility bills, so this seems like a good use of stimulus money. However, some analysts are skeptical that the new program will be as successful as “Cash for Clunkers”:

“The cash-for-clunkers (program) had a discernible value proposition for the consumer, because he knows how much his (clunker) is worth,” says [Sam] Darkatsh, the Raymond James analyst. “With appliances, there is no trade-in. You can walk into Home Depot and get a great deal on a home appliance any time you want one. Why would it drum up sales now?” Laura Champine, an analyst with Cowen & Co., agrees. “I’m not sure if it will be as powerful as cash for clunkers because there is something compelling about that $4,500 discount,” she says. “Also, a new car is more fun than a new dishwasher. So I’m not sure if it will be as much of a driver, but any driver is welcome right now.”

Share any relevant thoughts in this thread.

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Cash for Clunkers gets $2 billion from stimulus funds

President Barack Obama signed a bill today allocating an additional $2 billion to the to the Car Allowance Rebate System, more commonly known as Cash for Clunkers. The money will come from the American Reinvestment and Recovery Act (the economic stimulus bill approved in February). The Senate approved the bill by a 60-37 vote on Thursday night. Senator Tom Harkin voted yes, and Senator Chuck Grassley, who criticized the program earlier this week, voted no.

I liked Harkin’s idea to put income limits on this program, but the Senate wanted to get this measure passed before the summer recess. If the Senate had approved a different bill from what cleared the House last week, the funding would have been delayed until September.

The Senate vote went mostly along party lines, but four Democrats joined 33 Republicans in voting no, and seven Republicans joined 53 Democrats in voting yes.

I’m pleased to learn that most consumers who have taken advantage of this program have traded in a “clunker” for cars that get significantly better mileage. (Click here for lists of the most popular vehicles traded in and the most popular purchased with Cash for Clunkers vouchers.) The way Congress wrote the bill, people could have traded in SUVs and trucks for similar vehicles with only minimal improvements in fuel economy.

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More details on extra help for Iowa's unemployed

I recently discussed how Iowa is fully utilizing federal stimulus funds to expand unemployment benefits, unlike many other states, which are leaving all or part of that money on the table.

The Iowa Senate highlighted steps taken during the 2009 session to extend unemployment benefits, which went into effect on July 1:

· Improving and expanding services for unemployed Iowa workers. By making reforms to Iowa’s unemployment insurance program, our state will receive $70.8 million from the federal government to extend benefits for unemployed workers in training programs. It makes sense to support Iowans who are trying to upgrade their skills by attending community college and other types of training.

· Paying unemployment claims for replacement workers who become unemployed when Iowa National Guard and Reserve members return to their local jobs after active duty. When our soldiers come home, the state should help the replacement workers without penalizing employers.

· Providing $18.9 million to workforce field offices across Iowa. Iowa has 55 workforce centers, which provide job counseling, training, placement and other assistance. These services help laid off workers move forward and help local businesses find the employees they need.

For more details, read the full text of Senate File 197 here.

Note: the $70.8 million in federal funding for expanded unemployment benefits came from the economic stimulus bill, or American Reinvestment and Recovery Act. All House Republicans, including Iowa’s Tom Latham and Steve King, voted against that bill, as did almost all Senate Republicans, including Chuck Grassley.  

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Government Accountability Office praises Iowa's handling of stimulus money

I see a Chet Culver campaign ad in our future after reading this Radio Iowa story. The non-partisan U.S. Government Accountability Office examined how 16 states are using stimulus funds from the American Reinvestment and Recovery Act:

“We found that Iowa has a foundation of safeguards to help ensure the funds are being spent in the way that they were intended and to minimize the fraud, waste and abuse,” [GAO Iowa division head Lisa] Shames said. The G.A.O. report also praises Iowa for setting up an Accountability and Transparency Board.

“We found that there were many good features in place and that bodes well in terms of the Recovery Act dollars and to ensure that they’re going to create the jobs and retain the jobs that the law intended,” Shames said.

Click here for the summary of the G.A.O’s report on Iowa. From that page you can download the full report (a 40-page pdf file). Reports on other states are available here.

Did I mention that unlike many states, Iowa is fully utilizing stimulus funds intended to help unemployed people?

And that compared to many states, Iowa has wisely invested its stimulus funds for transportation?

We’ll be hearing more about this next year in response to Republicans attacks against Governor Culver. No doubt ragbrai08 is right, and some version of this Tom Vilsack re-election message from 2002 will return to Iowa airwaves in 2010:

My opponent suggests in negative ad after ad that a bunch of problems that have struck virtually every state in the nation are somehow unique to Iowa. That’s his whole campaign. The truth is that in Iowa, we’ve met that challenge better than most.

Though unemployment remains a significant problem in Iowa, our unemployment rate is well below the national average during this recession. Our state officials are doing a good job allocating federal funds intended to save and create jobs, and the I-JOBS program will save and create additional jobs.

Don’t expect Iowa Republicans to pay attention to the G.A.O.’s findings. They never got the point of the stimulus anyway.

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Iowa taking full advantage of stimulus unemployment funds

When Congress was debating the stimulus bill earlier this year, Mark Zandi, the chief economist for Moody’s, compared various forms of government spending and tax cuts in terms of economic stimulus “bang for the buck.” He concluded (pdf file) that various forms of government spending did more to stimulate the economy than various kinds of tax cuts.

The best kinds of spending in terms of stimulative effect were food stamps and extending unemployment benefits. Every extra dollar the federal government spends on food stamps generates approximately $1.73 in economic activity, and every dollar the federal government spends to extend unemployment benefits generates approximately $1.63 in economic activity. People who need these services are likely to spend additional money quickly, helping preserve jobs in the retail sector.

With this in mind, you might imagine that the states would take full advantage of money allocated to unemployment benefits in the American Reinvestment and Recovery Act. But you would be wrong, according to this article by Olga Pierce from ProPublica:

So far, only about half of the $7 billion included in the stimulus package [for expanding unemployment insurance] has been claimed by states. […]

Four states have explicitly rejected the funding, but many others have so far failed to pass legislation qualifying them for incentive payments. […]

Under the stimulus bill [2], states can qualify for the extra funding by extending unemployment insurance to new categories of workers. To receive a third of the funding, they must begin using something called an alternative base period, which would allow more low-wage workers to receive unemployment benefits. […]

To get the other two-thirds of the cash, they must adopt at least two other changes from a list that includes covering part-time workers and offering $15 extra per week for each dependent.

If states meet the requirements, they qualify for a federal lump sum payment that will cover the cost of expansion for at least three years, or longer in many cases. It was on those grounds – that after the federal funding runs out states will have to find another way to cover the cost – that Louisiana Gov. Bobby Jindal [3], Mississippi Gov. Haley Barbour [4] and others [5] that said they would reject the funding.

Bleeding-heart liberal that I am, I believe basic fairness justifies extending unemployment benefits to more part-time and low-wage workers. But even if you don’t care about fairness, Zandi’s analysis shows that extending unemployment benefits will get money circulating in the economy.

Click here for a map and a chart showing how much federal unemployment money each state has claimed.  

As of mid-June, 17 states had claimed none of the stimulus funding for unemployment benefits, and another 12 states and the District of Columbia had claimed only part of that money. In some of those states, Democrats are in charge. Progressives who have ridiculed Republican governors for rejecting stimulus money for unemployment benefits should also hold Democrats accountable on this score.

Fortunately, Iowa is among 21 states that have fully used these stimulus funds as Congress intended. Thousands of Iowans struggling to get by will benefit from the $70.8 million the stimulus bill appropriated to our state for unemployment benefits. Democrats in the state legislature and Governor Chet Culver deserve credit for enacting the necessary legislative changes to collect this funding.

Many of the states that have left stimulus money on the table have significantly higher unemployment rates than Iowa, by the way.

Speaking of boosting the economy, Zandi’s report showed that infrastructure projects were the third-most stimulative form of government spending. Every extra dollar spent on infrastructure generates an estimated $1.59 in economic activity. Remember that next time Iowa Republicans bring out their misleading talking points about the the I-JOBS program. Also remember that Iowa has used the stimulus bill’s transportation funding wisely compared to many other states, according to a recent review by Smart Growth America.

In contrast, most kinds of tax cuts Republicans advocate generate less than one dollar of economic activity for every dollar they cost the government. As a gesture to Republicans, Democrats replaced some spending in the stimulus bill with $70 billion allocated to fixing the alternative minimum tax, even though Zandi’s analysis found that a dollar spent on fixing the alternative minimum tax generates only about 49 cents in economic activity.

It’s too bad the Obama administration made a number of concessions to Republicans on the stimulus bill. Like Bob Herbert wrote a few months ago, when the GOP talks about the economy, nobody should listen.

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