Greenspan: Clunkers Cash An Effect of Economic Rebound, Not Cause

The former head of the Federal Reserve gave a thumbs-up to the cash for clunkers program but said Sunday it is popular only because the economy was on its way back up and not because it was stimulative.

Alan Greenspan said that the program has worked to get people to buy cars and move stock, but he wouldn't necessarily recommend it as an economic fix. 

"It's an interesting issue. I mean, I have qualms about the concept, but there is no doubt that that very extraordinary response is a very important indicator that the state of confidence in the economy is beginning to pick up. If we had been -- the clunker program had been put in place six months ago, it would have probably been a dud," Greenspan said on ABC's "This Week."

"Cash for clunkers" is a short-term government spending program that designated $1 billion to pay consumers up to $4,500 for trade-ins of old cars in exchange for energy efficient vehicles. 

Money for the program ran out months earlier than had been expected, forcing the House on Friday to vote for an additional $2 billion. The Senate has yet to take up the additional funding request

Obama's backers say the program is proof that the president's economic plan was correct.

"The so-called cash for clunkers program has actually been far more successful than people expected, both in terms of the number of car sales it's generated, and, I should say, in terms of the environmental benefit," said National Economic Council President Larry Summers, appearing on CBS' "Meet the Press."

For opponents, however, the deal sounds like additional debt to be paid later.

"My children and grandchildren are going to have to pay for these cars. ... The federal government went bankrupt in one week in the used car business, and now they want to run our health care system," said Sen. Jim DeMint, R-S.C., on "FOX News Sunday."