Great idea. let's do more of it. The real weakness in the economy is consumer spending. The last expansion was fueled by ever increasing consumer debt, but that could not go on forever. How about cash for old water heaters and refrigerators? Let's turn them in for more energy efficient ones. How about any essential item made in the US that would put more people to work?
The only thing wrong with the cash for clunkers program is the means of finance. There is no reason except superstition to finance it with government borrowing. It could be done with funds created by the Treasury or Federal Reserve. News programs are asking "Where will the money come from?" The implication of the question is that the money supply is fixed and if we are to have cash for clunkers it has to come from savings rewarded by payment of interest. But, in a recession when all resources are not being used, there is no reason to save. There is no opportunity cost.
New money can come from where it always has come from--new credits created by banks. Our banks are now mostly solvent, but few want to borrow money to make things when consumer demand is weak. When the banks don't want to create more money to put all of our resources to work, the government should do it. There is no reason other than myth and superstition that we allow people to be unemployed and citizens to cut back on their living level. Our plants did not rust or our engineers lose the formulas. We just need to understand the essentials of money creation. Money is made when a bank writes numbers after a borrowers name. Of course they charge interest for the loan. If government has given banks the right to create money, then government can certainly do the job itself and without paying itself or anyone else interest.
Incidentally, you may have read that some banks and Goldman Sachs made millions (or was it billions) last quarter and payed their executives absurd bonuses after being bailed out by the government previously. They did not make profits loaning money to business to make things, but rather they profited from financial trades in the equivalent of a giant casino--buying and selling paper. We saved their butts for this??