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Stimulating the American Auto Industry

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Message Dustin Ensinger

A measure intended to boost domestic auto sales gained a huge amount of traction after House Speaker Nancy Pelosi threw her support behind the bill on Wednesday.

The bill, sponsored by Rep. Betty Sutton (D-OH), would provide instant vouchers ranging from $3,000 to $7,500 to consumers who trade in their older vehicles to purchase newer, more fuel efficient vehicles.  

Introduced in the House on Tuesday, the bill, dubbed the cash-for-clunkers program, has widespread support among American automakers, dealers and the United Auto Workers union.  The backing of the top Democrat in the House may signal the bill's inevitable passage. 

"The speaker is supportive of this concept and looks forward to reviewing the details of Rep. Sutton's legislation," Drew Hammill, a spokesman for Pelosi, D- Calif., told CNNMoney.com.   

However, the bill is facing fierce opposition from foreign automakers and "free trade"- advocates because of a provision excluding the purchase of any vehicle built outside of North America which they claim violates American obligations under "free trade" agreements.   

That argument carries little weight, however, as a similar program was recently implemented in Germany - a country that also happens to be a WTOBig Three. member.  The program there was seen as wildly successful, increasing auto sales by 21 percent in February.  Moreover, American state governments have provided countless tax abatements, subsidies and other perks to lure foreign auto makers to their states to the detriment of Detroit's

Under the current language of the bill on-the-spot vouchers would be provided to consumers trading in vehicles over eight years old.  In exchange the government would then provide a voucher to purchase a new vehicle.  The amount of that voucher would depend on the fuel efficiency standards of the new vehicle.  To receive the vouchers, cars would have to get at least 27 miles per gallon on the highway.  Trucks would be required to get 24 miles per gallon and the new vehicle cannot be priced at more than $35,000.   

Domestic automakers attempted to get a similar measure inserted in the $787 billion stimulus package.  That effort, however, was thwarted by "free trade"- advocates, but the German government's actions now provide American lawmakers with some cover.   

"This legislation will help consumers, stimulate our economy, improve our environment, reduce our dependence on foreign oil and help our domestic auto and related industries," Sutton said in a statement.   

The United Auto Workers union concurred with that assessment, claiming the bill would be boon to domestic auto manufacturers.   

"It's fair to all major automakers, but gives incentives for the domestic production of vehicles that ensures jobs will be created in this country," said Alan Reuther, legislative director for the union. 

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Dustin Ensinger graduated from The Ohio State University with a Bachelor of Arts in Journalism and Political Science. He is a contributing journalist for EconomyInCrisis.org.
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