Rep. Betty Sutton (D-OH) (Photo: OHP)

The local Chronicle-Telegram newspaper reports that Sutton is seeking approval from congressional leaders for the county to reprogram $1.5 million in unspent stimulus money:

Sutton sent letters this week to David Obey, D-Wis., chairman of the
U.S. House Committee on Appropriations, and Jim Oberstar, D-Minn., who
chairs the U.S. House Committee on Transportation & Infrastructure,
seeking approval for LCT to use $1.5 million in untapped American
Recovery and Reinvestment Act of 2009 funds to operate the bus system.

“We hope new appropriations bills can be OK’d by year’s end that
will let us use this unspent capital money,” Cordes said. “We’re trying
to avert a total shutdown.”

Officials have said it is vital for the county to maintain some form
of public transportation to remain eligible for federal transportation
funds.

The inability of many localities to spend federal aid on transit
operating costs — thus creating jobs for drivers, maintenance workers,
and other day-to-day staff — has left many rail and bus networks
facing punishing service cuts.

Congress agreed
in June to let states use 10 percent of their stimulus grants for
operating assistance, but Sutton’s move could open the door for that
number to increase in the coming weeks.

Sign of the times? Sde-by-side foreclosures in Massachusetts. (Photo: Yovani via Flickr)

Irresponsible
behavior by banks led them to the brink of collapse — a collapse which
would have sent the global economy into a terrifying period of decline
– and so the government stepped in to prevent bank failures (after
learning a lesson from the dreadful experiment with Lehman). But these
interventions have put banks in a situation where they stand to gain
enormously from taking large and dangerous financial bets.

Similarly, government policies such as low gas tax rates and
import protections on light trucks encouraged the development of a
bloated domestic auto industry focused on the production of inefficient
SUVs.

When high oil prices and deep recession then
threatened to push General Motors and Chrysler into bankruptcy, leading
to hundreds of thousands of lost jobs, the government felt it had no
choice but to step in to keep the companies afloat.

Now the
government owns large stakes in companies that will only profit if the
American public goes car-buying crazy over the next few years.

The
list goes on. The economic crisis that currently afflicts us has made
it clearer than ever that we need to change the way we do many things,
but because the economy is in such difficult shape, it is hard to
pursue anything other than policies designed to keep the economic
engine from stalling out completely. Big transitions must wait for
later.

Can the same be said for sprawling urban development?
Have government interventions essentially bailed out the very places
that proved most vulnerable amid oil shocks and housing busts?

Chris Leinberger argued that very point in a recent blog post at The New Republic’s Avenue:

While there is no federal or private … dataset that
identifies where exactly in metropolitan areas the most mortgage
defaults are, local analyses and some news reports indicate the bulk of
the problem is on the fringe…Thus,
some of the biggest beneficiaries of federal efforts to stem
foreclosures and keep families in their homes are those located in
exurbia.

He
has a point. Foreclosures have been concentrated on urban fringes, so
federal efforts to modify mortgages and otherwise reduce defaults have
tended to direct more aid to exurbs than inner suburbs and city
centers. In addition, rates of home ownership and car ownership are
higher in the suburbs than in city centers, so federal housing
subsidies (including the new home-buyer tax credit and low interest
rates generally) and automobile subsidies ("Cash for Clunkers") have
had a geographic bias toward suburbanites.

To a certain
extent, this has been unavoidable. Most Americans live in auto-oriented
areas in suburban places, and a large share of those Americans are
facing financial difficulty. Any measure that helped stressed
households, including checks of equal value cut to all workers, would
tend to benefit suburbanites more than urban dwellers.

One
should also be careful not to oversell the value of the interventions.
Efforts to reduce foreclosures have actually had pretty depressing results.

But
certainly the government might have done things differently — and
pursued policies designed to help households as much as possible –
rather than those aimed at keeping households in homes they couldn’t
afford, or moving families into homes in unsustainably sprawling
locations. So it’s important to ask: What can we expect for exurban
areas and how will the government’s policy choices affect them?

First,
it’s important to understand the dynamics of the bubble. For a number
of reasons, among them low interest rates and innovations in mortgage
finance, the residential real estate market began to experience a boom
at the beginning of this decade. This energy in housing markets
manifested itself in different ways in different places.

In
areas where housing supply was tight — where it was not easy to
respond to increased demand by building more — prices rose sharply. In
areas where housing supply was more elastic, prices rose some, but
construction exploded. In general, it’s tough to build in dense center
cities, and easy to build on the low-density fringe.

As a
result, rising housing demand led to construction on the urban fringe.
It also led to higher prices in center cities, which pushed many low-
and middle-income families to move to places with cheaper housing
markets, which increased demand for homes on the fringe and led to even
more construction. Rising demand for exurban living led to construction
of exurban housing, and rising demand for urban living led to construction of exurban housing.

When
the crash came, it quickly became apparent that housing inventory on
the fringe had grown out of all proportion to the actual demand for
such housing. Meanwhile, there continued to be excess demand for homes
in center cities.

So while the bust ended up being painful
for everyone, it was far less painful for urban centers. In those
places, price declines brought in buyers, helping to keep inventory
down and price declines orderly.

In exurbs, by contrast,
falling prices went hand in hand with huge numbers of vacancies. Prices
fell chaotically and dramatically as inventory overhang led to falling
home values, which contributed to foreclosures, which added to
inventory, which further depressed home values and led to still more
defaults and foreclosures.

Another way to say this is that
center-city housing markets experienced a correction, while exurban
housing markets entered a vicious cycle leading to wrenching housing
price declines that will likely push prices below replacement costs in
some areas.

This is a dangerous place for neighborhoods to
be. Vacant homes will begin to deteriorate, and occupied homes unlikely
to sell for more than replacement costs (or more than the value of the
owner’s mortgage) will suffer from disinvestment. The housing stock
will become second-rate.

As neighborhoods fall apart,
wealthier and more mobile homeowners will move away, while excess
inventory and rock bottom prices will attract
low-income households. The tax base will fall and so services will
decline, and the general desirability of such areas will drop. Some,
and perhaps many, of these neighborhoods will become slums.

How
do we know? Well, this is a storyline we’ve seen before, both in center
cities during the decades of urban decline and in depopulating Rust
Belt cities for much of the past half century. It is a process that is
very difficult to reverse.

And in some ways, suburban slums
may be far worse for the poor than the previous urban version. In
center cities, density and public transit provide a basic level of
mobility for the working poor; in suburbs, by contrast, lower income
families cannot survive without an automobile. And even with massive
suburbanization, inner-city decline could never entirely escape public
attention, thanks to lingering employment concentrations in center
cities, as well as historical and cultural attractions there. As a
result, there was always some pressure for renewed investment in center
cities.

But suburban neighborhoods are relatively remote; the
very idea of the places is that residential neighborhoods remain well
away from employment concentrations and other destinations. Remoteness
may well allow suburban slums to decline in obscurity.

These
changes will not be universal, just as previous decline in urban
centers was far from universal. Rich suburbs will likely stay rich, and
denser suburban areas may well experience great success by shifting to
greater walkability and density. But many suburban neighborhoods may
find themselves in circumstances that once characterized urban slums –
poverty, deteriorating services, failing schools, and rising crime.

Given all of that, how do the federal government’s assistance programs measure up? Not particularly well, unfortunately.

The
mortgage modification programs have primarily been oriented around
keeping people in their homes (and loans). These have generally not
been that successful; a surprisingly large number of modified mortgages
still wind up in default. Keeping families who cannot afford their
loans in their homes is likely to be bad for the families themselves
and may lead to disinvestment, as those homeowners will continue to be
cash-strapped and may suspect that they’ll be unable to sell the home
for more than the value of their mortgage.

Meanwhile, the
housing tax credit is tailor-made to get relatively low-income buyers
– and first-time buyers — into suburban homes. That’s the intent; the
thinking is that bringing buyers into the market will support prices
and end the cycle of decline.

But this effort may well fail.
Housing inventory in hard-hit neighborhoods is too substantial to be
much reduced by an $8,000 credit (particularly one put in place when
one-fifth of the population is under- or unemployed). And by
encouraging lower income families to move to these neighborhoods, the
government may actually be accelerating the process of decline. Higher
income families already in those areas may not be willing to stay alongside the newcomers, and their departure will reduce the tax base.

In short, the government isn’t just subsidizing sprawl. It’s subsidizing the deterioration of sprawling areas.

What
should the government be doing? Well, for starters, it should recognize
that the housing crash has meant an increase in the relative price of
center city homes, which were already unaffordable for many families
before the bust. It is important to provide opportunities for
affordable center city housing (for its own sake, and to reduce the
rush of lower-income families to the fringe), and that means
encouraging construction in center cities.

In particular,
since it is clear that safe, walkable neighborhoods are in very high
demand and are therefore holding their value well, it is important to
build more such places.

Next, the government needs to stop
subsidizing home ownership and focus on increasing mobility. Home
ownership in an area where prices are declining is an anchor on a
household. It can trap families in declining neighborhoods or in
metropolitan areas where jobs are scarce. If keeping struggling owners
in their homes is a priority, then policy should focus on getting them
out of their loans and keeping them there as rent-paying tenants.

Third,
government officials should learn the lessons of urban decline –
particularly that allowing the decline of the tax base to lead to an
erosion in service quality will create negative social outcomes that
will be very difficult and costly to address in the future. Once poor
schools and high crime levels become the norm, it will take years and
overwhelming investments to turn things around. It will be better for
all involved to step in and continue to support services in
deteriorating neighborhoods.

And finally, policy should focus
on improving physical mobility and urban design in these places, for
two reasons. First, greater mobility — including walkability and
transit access — will be of great use to poorer families which may
have irregular or no access to an automobile. And second, efforts to
improve the design and connectivity of these communities will make them
more attractive and less likely to suffer from complete collapse.

The
problem is that these represent substantial changes — a transition
away from the prior way of doing business — and it is difficult to do
anything other than keep fingers in the dam at this point. This is
understandable.

But with our approach to the housing crisis
(and to the crisis of home and transportation affordability generally)
as with the banking crisis and the crisis of consumer spending, and so
on, the problem is clear — putting out the fire is not enough. Absent
real reform in banking, another crisis will hit us, and soon. Absent an
increase in savings rates, over-indebted households will paralyze the
American economy.

Without addressing the serious imbalances
in the way we plan and build our communities, we can expect a serious,
long-term crisis in exurban neighborhoods. It took us 40 years to begin
to get declining urban centers back on the right track. Do we really
want to repeat that experience?

Steven Rattner (Photo: WSJ)

This
was like declaring in an airport terminal one’s hope that man may
someday enjoy heavier-than-air powered flight, but most of the heads in
the audience nodded in agreement.

Rattner was there to speak on the topic of the administration’s
automobile bailout and rehabilitation strategy. He was hopeful but
realistic; he recognized that General Motors and Chrysler face an
uphill battle, but he believes that the government was able to do
enough to give the firms a shot at returning to profitability.

Why
that should be a concern of the government is another question
altogether, and it’s not one with which Rattner really engaged.
Understandably, I think, the administration agreed that GM and Chrysler
really shouldn’t be allowed to fail in the depths of recession.

And
then I believe they determined that if they were going to keep propping
up the companies, they ought to at least shepherd them through a
balance sheet-clearing bankruptcy and reorganization, in the hopes that
the companies might eventually make money.

But what Rattner
was careful not to address was this: Saving the car companies will not
protect American automakers’ market share, will not save the city of
Detroit, and will not really save that many jobs.

The line I
quote in the first paragraph was made in the context of an argument
about annual auto sales, and why sales totals are likely to return to
levels typically observed before the recession. Sales of light vehicles
grew to a peak of 17 million in 2005 before declining and then
plummeting to their current level, in the neighborhood of 9 million
(save for the month of August, thanks to "cash for "clunkers).

According
to Rattner, GM will break even at a level around 16.5 million car
sales. Maybe we’ll get there. Population continues to grow.

On
the other hand, households may find themselves holding on to
automobiles longer (particularly since household debts may remain a
problem for the next decade). They may also find themselves buying
fewer cars. America is aging, and households with retirees may not want
a car for each commuter. More families might opt for one vehicle, and
use car-sharing services when another vehicle is necessary.

But
now we find ourselves in a world in which GM shareholders — among
which number you and me and every other taxpayer — need sales to move
above 16.5 million to get the company back to profitability. That’s a
strange place for us to want to be.

If, given the
option to buy as many automobiles as they want, Americans choose to buy
fewer than they did before, we should cheer. Cars are expensive and
largely used as production goods rather than consumption goods –
people buy them because they need them to do other things, like work
and buy food. If they then find that they don’t need them as much, a
lot of revenue is freed which can be used on debt service, health care,
better food and homes, education, and entertainment goods.

A
world in which Americans are as happy with one car or no cars as they
are with two or three is a better one, just as a world in which
companies can produce more goods with less energy or machinery is a
better one.

The transition is a difficult one for workers in
the automobile industry who find themselves needing a new line of work,
but nothing in the reconstitution of GM and Chrysler will change that.
Manufacturing processes continue to become less labor-intensive. That’s
a technological trend that the government is powerless to reverse. The
question, then, is how best to facilitate transitions into new fields.

And here, the bailout looks somewhat counterproductive. Today a shuttered car plant in Delaware will be converted
for use by a producer of electric vehicles. The decline of GM opens up
production possibilities for other enterprises, and the impeding of
that decline frustrates them.

It also prevents policymakers from seeing beyond the automobile. As David Alpert wrote yesterday (and Sarah Goodyear noted today):

I’ve been meeting with elected officials in the region about
transportation and development issues. One representative from
Montgomery County recently expressed a general sentiment among area
leaders that "we have to do something" to accommodate increased traffic
between the American Legion Bridge and I-270. After all, Virginia is
building HOT lanes that will bring more cars onto the Beltway, and
Maryland is pushing for more lanes on 270 north of Rockville.
Logically, this person said, the state and the county will probably
have to connect the two with additional HOT lanes through Potomac and
Bethesda.

Later in the conversation, when discussing Gaithersburg West, I
noted the potential for biotech development at White Oak. That location
is already a life sciences hub. It’s closer to both DC and Baltimore,
reducing the likely commutes for people working there versus
Gaithersburg West. It’s also in a part of Montgomery County with far
fewer jobs than people, unlike the 270 corridor.

What it lacks, like Gaithersburg West, is good transit. There
is an inactive proposal to build a Purple Line spur up New Hampshire or
Route 29 to the area. Why not revive the idea? When I brought it up,
the representative jokingly said something like, "I’d like some of what
you’re smoking." And in fact, with many transit projects including the
Purple Line, Baltimore Red Line, and Corridor Cities Transitway already
vying for funds, it would be very difficult to add a Purple Line spur
to White Oak.

That’s the conventional wisdom among most elected officials. We
"have to do something" to add road capacity. But transit projects are
so difficult as to be nearly laughable. Yet freeway projects are not
cheap. As we saw from ACT’s alternative plan
for the I-270 corridor, you can build a lot of transit for the price of
some freeway lanes. It’s just that leaders are too accustomed to
viewing road capacity as a necessity and transit as a luxury.

There
is a terrible chicken-and-egg problem to transportation planning, in
which planners express regret that there is so little transit demand
and so much traffic before building new roads. They have to accommodate
the demand they’ve got! But you can’t have transit demand if you don’t
have transit, and if you don’t recognize that, then you’re doomed to
keep building roads forever. No one in the mind of the planners has yet invented a substitute for the automobile.

But
of course, that’s not true. There are many substitutes for the personal
auto. And now that households seem to be warming to them, the
government finds itself looking at the shift as a problem to be solved,
rather than a welcome trend to be encouraged.

It’s fine to
try and alleviate the pain of a major economic transition, but if
officials don’t understand that the transition is just that, and not a
temporary slump, they may attempt to turn the palliative into a barrier
to change. If you think there’s no substitute for the automobile, then
the decline of the auto industry looks like running headlong off a
cliff.

But in reality, there is something just fine on the
other side of the transition: a world in which people drive less and
don’t mind it. Maybe officials blind to that possibility will
eventually stumble into it nonetheless. It would be much better for all
concerned — including those dependent on the auto industry for their
welfare — if the government managed to see it and chart a course for
it.

(Photo: Newsday)

In
part this is because the program looks like a big success, and
certainly congressional leaders and the White House have not been
bashful about touting it as such. The original $1 billion allocation
for the program was exhausted within days, and as sales data for August
begins to emerge it is clear that car sales experienced a banner month.

Was CARS a good policy, all things considered? Let’s look at a few of the latest numbers on the program.

There
were approximately 1.17 million vehicle sales in August, which works
out to a seasonally adjusted annual rate of about 14 million vehicles.
June’s sales rate was under 10 million and near the recession low,
while last August’s rate was also about 14 million. Meanwhile, the
August norm in good times was about 16 million.

What does
that say about the value of the program? Well, let’s say that August
sales would have matched June’s sales in the absence of CARS. They
almost certainly would have been higher given economic improvements
between June and August, but for argument’s sake, let’s say they were
the same. We can then estimate how many additional sales CARS produced
and the actual subsidy per new sale.

Here‘s economics blogger Calculated Risk:

If Edmonds.com is correct,
and total sales were 1.17 million…in August, then the tax credit
only generated about 320 thousand extra sales. Of course some regular
car buyers might have put off a purchase to avoid the rush in August,
so this isn’t perfect, but instead of costing taxpayers $4,170 per car
(as announced by DOT), the cost to taxpayers per additional car sold
was close to $7,200.

In other words, CARS just didn’t generate that many new sales. Much of the subsidy went to buyers who would have purchased anyway.

As
it turns out, much of the subsidy also went to people who weren’t
interested in purchasing GM or Chrysler vehicles. While year-over-year
sales figures rose in August for Ford, Honda, and Toyota, sales declined by
15 percent and 20 percent respectively for Chrysler and GM. To the
extent that CARS was designed to help struggling American automakers,
it doesn’t seem to have had the desired effect.

Particularly worrisome is today’s report
that sales fell precipitously in the last week of August — after the
CARS program ended. Rather than generate momentum for the automobile
industry, CARS may have primarily moved sales around. To a certain
extent, it might also have been counterproductive. How so?

Given fixed supply, a purchase subsidy will often just lead to an increase in price:

Jeremy Anwyl, CEO of the auto Web site Edmunds.com, said dealers and
automakers clearly gained from the big boost in sales. But while the
incentives helped consumers, average prices for vehicles went up as
buyers less concerned about prices rushed to take advantage of the
rebates.

Inventory shortages from the popular program could keep
prices high and drive down new vehicle sales. "We have created a sales
bubble and now that bubble has burst," Anwyl said.

And
while Transportation Secretary Ray LaHood claimed that CARS saved jobs
and the the inventory draw-down would lead to increased production,
automakers are likely to be cautious in building new vehicles if demand
appears unsustainable. The White House’s claim that CARS will boost
third quarter output by 0.3 percent to 0.4 percent will not prove
accurate if September sales fall back below trend.

And then
there’s the environmental effect of the plan. Much attention has been
paid to the fact that purchased vehicles were some 9 miles per gallon
more efficient than traded-in vehicles. As I’ve noted before,
much of that gain would likely have taken place without the program,
based solely on the fact that oil prices rose steadily over the past
decade.

One pair of economists estimated
that the carbon savings from the CARS program worked out to roughly
$596 per vehicle — well below the voucher values of $3,500 or $4,500
per new vehicle. Another economist estimated
that the implied cost of carbon under the program was somewhere between
$237 and $500, much higher than what is assumed to be an efficient
carbon price.

No matter how you cut it, CARS was an expensive means to reduce emissions.

That
doesn’t mean that it was a total waste. There was almost certainly some
positive economic and environmental impact from the policy.

But
that $3 billion could have been used elsewhere. Other potential
programs — restoring heavily used transit services trimmed by budget
cuts or funding weatherization programs, for instance — would almost
certainly have been greener and more stimulative.

In the end,
"cash for clunkers" should be understood as a missed opportunity,
politically attractive but far from ideal as policy.

(Photo: AFP/Getty)

General
Motors and Chrysler, which required a combined $65 billion in
government loans before declaring bankruptcy, reported August
year-to-year sales declines of 20 percent and 15 percent, respectively.

Detroit media reports focused
on GM’s 30 percent sales increase between July and August 2009, but the
company’s car sales were down 1 percent even after being "bolstered" by
the taxpayer-funded "clunkers" rebates.

Ford, the lone U.S.
automaker that did not require a government rescue, reported a 17
percent year-to-year sales increase in August. As the New York Times
reported, the company was pleased by one sales jump in particular:

At Ford, sales of the F-series, a large pickup truck popular among
building contractors, rose for the first time since October 2006, a
positive sign for the automotive market and the broader economy, the
company said. Ford sold 13 percent more of the F-series and 57 percent
more of a smaller pickup, the Ranger.

“It may be a glimmer of
hope,” Ken Czubay, Ford’s vice president of marketing, sales and
service in the United States, said on a conference call.

The F-150, the most well-known of the F-series trucks, gets an average of 16 miles per gallon (mpg) of gas. The Ranger gets between 16 mpg and 23 mpg, depending on the engine and transmission. "Glimmer of hope," indeed.

(Photo: AmericaJR.com)

A group of auto retailers have begun promoting the "Auto Stimulus Plan," a rebate system paid for by dealers themselves.

The private "clunkers" spinoff offers several features that the government plan was criticized for lacking. It allows consumers to buy used cars, and its rebates are tiered in proportion to the level of fuel-efficiency improvement that is achieved by the trade-in.

The specifics of the Auto Stimulus Plan vary based on state regulations. But a trade-in that provides 2 miles per gallon in greater fuel-efficiency would earn a rebate of 10 percent of the older car's value, and a 5-mpg improvement would earn a 20 percent rebate, according to a recent Associated Press report.

Unlike the Obama administration's "clunkers" program, which was questionably touted by the president and his allies as a boon for the environment, dealers involved in the private version make no bones about their priorities.

Transportation Secretary Ray LaHood said Wednesday he would disclose
within two days updated figures on the program, including how much of
the $3 billion in funding was left. He said he would also offer a
blueprint for how the administration will wind down the program to
ensure all vouchers issued by dealers are reimbursed by the government
before the money runs out.

"They’re going to get their money," Mr. LaHood said, responding to
dealers’ complaints of payment delays. "There will be no car dealer
that won’t be reimbursed."

Auto
dealers have submitted claims to about $1.8 billion of the program’s
taxpayer-funded rebates, which represents 435,102 vehicle purchases,
according to data released today by the U.S. DOT.

(Photo: MPR)

But
could the administration continue to leave the gas tax untouched while
relying on taxpayer-subsidized rebates to gin up new car sales? That
prospect is a very real one, as two new posts from the Atlantic and the New Republic observe.

The
first post focuses on the government’s plug-in hybrid tax credit, which
was expanded by the economic stimulus law to offer up to $7,500 per
vehicle for the first 200,000 models sold by every automaker.

The
Atlantic incorrectly states that the stimulus allocated $2 billion to
the credit — that number is the estimated cost of the provision, which
has no dollar limit — but the risk remains the same: If GM sells
200,000 of its Chevy Volts, the credit would take $1.5 billion in revenue from government coffers.

If similar successes for the Nissan Leaf
and the upcoming plug-in Toyota Prius follow, it’s easy to see the cost
of the tax credit topping $4 billion. And as "cash for clunkers" showed,
members of Congress are loath to limit popular pro-industry programs
during an economic slowdown for fear of "messing with success" –
regardless of the estimated costs of the benefits in question.

That could lead to an extension of the plug-in hybrid credit to continue stimulating sales, at a continued cost to the already-depleted Treasury. Meanwhile, the less popular option of increasing the gas tax would immediately pay for itself (as my colleague Ryan put it earlier).

The New Republic’s post looks at a still-unpassed proposal for "feebates,"
a combination of taxes on gas-chuggers and rebates for buyers who
choose cars that exceed fuel-efficiency standards. Again, feebates
follow the "cash for clunkers" template by using taxpayer money — the
fees are not guaranteed to offset the rebates and likely wouldn’t if
drivers flock to efficient models — to encourage greener car-buying
behavior.

But even if an "independent mileage benchmark" were used to ensure that the feebates pay for themselves, as the author suggests,
the more prudent course of action would be simply to keep raising
fuel-efficiency (CAFE) standards. Given that a proposal for a 40 miles
per gallon standard fell three votes short of becoming law 20 years ago, the current 35.5-mpg plan appears ripe for an upgrade.

The
issue comes down to political courage: Offering rebates and tax credits
doesn’t require much of it, but raising the gas tax and CAFE standards
takes quite a lot.

But if the "clunkers" data is so successful, why won’t the U.S. DOT release it in full? From the AP:

The Obama administration is refusing to release government records
on its "cash-for-clunkers" rebate program that would substantiate — or
undercut — White House claims of the program’s success, even as the
president presses the Senate for a quick vote for $2 billion to boost
car sales.

Transportation Secretary Ray LaHood said Sunday the
government would release electronic records about the program, and
President Barack Obama has pledged greater transparency for his
administration. But the Transportation Department, which has collected
details about 157,000 rebate requests, won’t release sales data that
dealers provided showing how much U.S. car manufacturers are benefiting
from the $1 billion initially pumped into the program.

Some initial numbers
on "cash for clunkers" have been circulating widely in Washington as
the White House prods senators to approve the $2 billion infusion
before leaving town this weekend for a month-long recess.

Yet only about half
of the 250,000 auto sales attributed to the program have been processed
so far, according to lawmakers, casting doubt on the definitiveness of
the data.

The non-profit watchdog group Public Citizen filed a
Freedom of Information Act request today seeking more detailed numbers
on "clunkers" sales. As Streetsblog Capitol Hill reported yesterday,
the DOT is also declining to release details on the deal it signed with Citigroup, beneficiary of a $45 billion government bailout, to help process "clunker" deals.

What’s no secret, however, is LaHood’s ideal choice of a new car. "I have my eye on an Explorer, four-wheel drive," he told MSNBC yesterday. The 2010 Explorer 4WD gets a combined 16 miles per gallon — barely qualifying it for the "clunkers" program.

(Photo: AP)

That same day, however, energy analysts were crunching the numbers for Reuters. Even if $2 billion in new "clunker" rebates were offered, they found, the total resulting decline in America's daily oil consumption would be 0.05 percent:

"It has proved to be a highly successful vehicle marketing tool," said Tim Evans, energy analyst for Citi Futures Perspective in New York. "But you would need a microscope to see the demand impact for gasoline from this program because it involves a relatively small number of vehicles."

The Reuters estimate assumes an average upgrade in fuel efficiency of 10 miles per gallon, which is in line with initial auto industry statistics on new trade-ins.

The analysis also assumes 250,000 trade-ins, which the government estimates is roughly the number that took place during the first $1 billion week of the taxpayer-subsidized "clunkers" program. Given the likelihood of new funding for the rebates, however, that 0.05 percent number could double or triple -- for a total daily oil-consumption reduction of 0.15 percent.

The second argument, that offering $2 billion in extra "clunkers" cash would not amount to deficit spending, stems from Democratic leaders' decision to shift the funds over from a Department of Energy (DoE) loan guarantee program.

That strategy was designed to appeal to fiscal hawks who would have a difficult time voting to add to the already trillion-dollar federal deficit. Indeed. Sen. Claire McCaskill (D-MO) already put her leaders on notice (via Twitter) that she could only vote yes on "clunkers" if no new money was spent.

But the DoE loans in question were approved to encourage the development of alternative energy and biofuels, two "green job" creators that have influential allies on Capitol Hill. Senate Energy Committee Chairman Jeff Bingaman (D-NM) is already criticizing the shift as a raid on the clean-energy pot, and Renewable Fuels Association chief Bob Dineen said he wants Congress to promptly put the $2 billion back home at the DoE:

The ethanol industry understands the trying economic times this country finds itself in and thus supports ideas like the "cash for clunkers” program, but is concerned to see the program paid for by depleting the renewable energy loan guarantee program. We hope Congress will move quickly to replenish the fund. One of the advantages of the “cash for clunkers” program is putting more fuel efficient cars on the road, however those new cars should also be running on renewable fuels like ethanol in order to benefit both the changing climate and the domestic economy. For the U.S. long term auto and fuel needs, it seems counterproductive to limit the renewable fuels industry.

Transportation Secretary Ray LaHood (Photo: AP)

Citigroup, one-third of which is controlled by the government that gave the bank a $45 billion bailout, is reportedly tripling the number of workers on its "clunkers" contract to handle the increased demand.

That
extra work could involve more money for Citigroup, but the amount the
bank is getting from the Obama administration to help manage the car
rebates remains unknown.

Streetsblog Capitol Hill has asked
the U.S. DOT for a copy of the contract, as well as data on any other
companies that may have bid on the opportunity, and will update this
post as more information becomes available.

What is known, as
LaHood noted yesterday, is that the government did not anticipate the
size of the car-deal backlog that ended up accumulating between July 1,
when the "clunkers" rebates got an initial $1 billion infusion, and
July 27, when the program officially launched.

"There were some bureaucratic problems in the process, in
making sure we had enough people contracted with to do the paperwork,"
LaHood told
C-SPAN’s Newsmakers show. "You don’t want to have these kinds of
problems, but it’s the kind of problem that shows the program has been
very successful."

LaHood
also made no bones about the Obama administration’s desire to see the
rebates extended without any stronger fuel-efficiency requirements for
cars that are traded in. Sens. Dianne Feinstein (D-CA) and Susan
Collins (R-ME), have suggested they would not support any new money unless greater environmental benefits were ensured from the auto purchases.

"In
a way, we’re meeting the metric they would like," LaHood said of the
two senators, asserting that fuel efficiency benefits have been
enhanced by the amount of trucks that are being swapped for smaller
vehicles.

Two weeks ago, Ray LaHood candidly addressed the need to reduce the nation's vehicle miles traveled in order to halt the devastating effects of climate change. But the Transportation Secretary had a decidedly different message today.

(Photo: NYT)

Originally touted as a boost to both the environment and the adrift domestic auto industry, the "cash for clunkers" concept quickly became nothing but the latter after Congress watered it down to apply to cars that get as little as 22 miles per gallon -- and trucks that boast even lower fuel efficiency.

But today's event continued to perpetuate the erroneous claim that $1 billion in public subsidies for new car purchases would help reduce emissions as well as rescue the auto industry.

"This really is a three-for," Sen. Carl Levin (D-MI) said. "It's great for the economy, a great thing for consumers ... third, of course, it's great for the environment itself."

Who the program isn't great for is transit riders hoping to escape their cars. The original "clunkers" bill would have allowed car owners to take their trade-in benefit in the form of transit vouchers, but LaHood said that option is unavailable now that the program has been implemented.

The program also brings bad news in the fine print for owners of serious "clunkers": Benefits are not available for cars manufactured before 1984.

While the DOT estimates that as many as 250,000 autos will be scrapped before the initial infusion of cash runs out, car industry forecasters at Edmunds.com believe only 50,000 extra sales will result, leaving the taxpayers with a whopping $20,000 bill for every new car purchased.

What's more, the program could have an unforeseen cost as dealers figure out how to transport the junked vehicles to a government-approved salvaging plant. Other than the engine, parts of the old "clunker" can be recycled into other cars, but that resale is not required.

The Automotive Aftermarket Industry Association, which represents more than 23,000 car parts and service companies, predicted a "consumer backlash" to the program as more people realize the bureaucratic hurdles and environmental costs of disposing of traded-in cars.

Still, today was a happy occasion for lawmakers such as Levin and freshman Rep. Betty Sutton (D-OH), who out-maneuevered senators backing a stronger version of "cash for clunkers" in pushing her version of the program into law.

Echoing an argument used during the economic stimulus debate earlier this year, Sutton depicted the "clunkers" idea as, quite simply, a way to keep people employed. In her home district, Sutton declared, "car dealerships are bustling!" As many as 50,000 jobs in her state depend on the local auto assembly plant, she added.

And that's good news for the Obama administration. which has steered GM and Chrysler through bankruptcy amid criticism from some in the president's party.

The U.S. DOT's readiness to lend automakers a hand -- no matter the mixed environmental messages that result -- is a testament to the White House's belief in the political benefits of keeping car companies flush.