Without a fresh infusion of government cash, the Clunkers program will soon shut down.

Despite clear signs of success, the U.S. Senate seems reluctant to approve an extension of the so-called Cash-for-Clunkers bill.

The House authorized a $2 billion extension to the original, $1 billion fund, formally known as the Car Allowance Rebate System, or CARS, and the Obama Administration has joined those lobbying for approval by the other side of Capitol Hill.

There would be a significant irony should the Senate reject the proposal, as many observers are now calling CARS the most immediately effective stimulus program to emerge from Washington since the nation fell into the current, deep recession.  Not only has the program spurred hundreds of thousands of motorists to buy a new vehicle, but it appears they are purchasing even more fuel-efficient models than Clunkers proponents had anticipated.

Describing CARS as “inept and poorly run,” South Carolina Republican Jim DeMint signaled he is unlikely to support the requested $2 billion infusion, though his Carolinian colleague, Lindsay Graham, also of the GOP, told the Today Show, “I think the Senate will act this week and get some of the clunkers off the road.”

Graham added that he hopes the White House will use remaining stimulus fund money to fund the expanded Clunkers program, rather than plunging the Treasury even further into debt.

So far, federal officials say they have processed the paperwork for about 120,000 sales under CARS, and as many as 130,000 more could be completed in a matter of days.  There is some confusion as to whether the program has already run out of cash.  Some dealers have stopped taking orders based on the rebates, and others are asking motorists to sign forms that would require them to repay the dealer if their voucher requests are denied.

Under CARS, a motorist can trade in an older, low-mileage vehicle on a new, higher-efficiency vehicle and, if qualified, receive vouchers worth either $3,500 or $4,500.  It was anticipated that approximately 250,000 sales would be generated by the program, which was originally set to expire in November.  Many dealers began lining up customers well before the official launch of Clunkers, less than two weeks ago, and according to the White House, the original $1 billion fund will all but certainly be used up by this coming weekend.

An additional $2 billion could generate another 500,000 sales, proponents suggest.

The Clunkers program is being credited with the industry’s relatively strong performance in July.  While total new vehicle sales were still down 11% compared to year-earlier levels, the numbers were up markedly for June, and compare favorably to the 35% decline in new car sales for all of 2009.

There are other reasons why CARS backers are claiming success.  Those claiming vouchers opted for smaller, more fuel-efficient models than anticipated.  Dave Scrivener, a Maryland videographer, says he “clunkered” his ’91 Ford F150 for a 2010 Mazda3.  “The purchase would not have happened,” he said, “without $4500 Uncle Obama placed on the hood.”

Among the first 120,000 applications processed, the average passenger car purchased using CARS cash got 28.3 mpg, while it was 21.9 mpg for SUVs and 16.3 mpg for pickups.  The Ford Focus was the number one vehicle consumers opted to trade in on, though on the whole, Japanese and Korean makers have generated more sales through Clunkers than the Big Three, so far.

That is only part of the picture, say sponsors.  Traditionally, when a clunker is traded in, it simply goes back on the used car lot, to be sold again, and to continue burning lots of gas and spewing pollutants.  Under CARS, however, vehicles taken in must be “killed,” by replacing the engine oil with a sodium silicate solution.  It causes the motor to permanently seize up.  The hulk is then sold for scrap.

“The statistics are much better than anybody dreamed they would be,” said California Senator Diane Feinstein, who was one of several Senators – from both sides of the aisle – who say the data have convinced them to vote in favor of the extension.  But Washington observers warn there are still not enough solid votes to ensure passage.  A vote is likely to be held before week’s end.