Cash for Clunkers Suspended Indefinitely: $1 billion Already Gone

White House officials and lawmakers were studying late Thursday how to keep alive the government’s cash-for-clunkers incentive program because of concerns the program’s $1 billion budget may have been exhausted after just one week.

Obama administration officials warned congressional leaders Thursday it planned to suspend the program at midnight. But the White House released a statement late Thursday saying that completed deals would be honored and the program is still under review.

A White House official said, “We are working tonight to assess the situation facing what is obviously an incredibly popular program. Auto dealers and consumers should have confidence that all valid [cash-for-clunker] transactions that have taken place to-date will be honored.”

Lawmakers are discussing with White House officials where to find funding — including possibly tapping the government’s Troubled Asset Relief Program, or TARP, a congressional aide said.

The clunkers program, which offers rebates of up to $4,500 to consumers who trade in old vehicles and buy new, more fuel-efficient models, began July 24 and sparked a surge in car sales.

As of 9:41PM EST, the Detroit Free Press is reporting that White House administration officials alerted Congress this evening that the Cash for Clunkers would be suspended, though White House officials have denied the report. Confusion is running rampant at this point, but it seems that the $950 million allocated for reimbursement of passenger car and light truck rebates is all but gone and government officials will spend Friday figuring out how to find more money for the program and untangle the reimbursement process for dealers.

The speed with which it took off now puts it among the most successful stimulus packages to come out of Washington since the start of the recession. The boom in car sales will give a much-needed bump not just to auto makers and dealers but also local government coffers that collect taxes on car transactions.

But the program’s unexpected success also will put Congress and the Obama administration in a bind. With deficits soaring, lawmakers are increasingly reluctant to spend additional billions they don’t have.

What do you guys think? Should the Government keep giving out free money? Is the stimulus bill a good bill? Will this actually help bring our economy out of a recession?