I'm not a big supporter of the program (it certainly doesn't directly benefite me), but I think it comes down to the larger question of "economic stimulus". I seems that the point where you need economic stimulus, something is already broken. To me, I'm not sure that it isn't the system as a whole.

Whether the stimulus is a subsidy, a straight kickback, a rebate, or a tax refund, it is all essentially the same thing, which is an attempt to get money circulating and goods/services being purchased. I'd rather we lived in a country where the economy didn't collapse unless everyone is consuming like mad. To me, if people aren't spending money, it is because they either don't have it or they are "afraid" to spend it because they aren't sure they'll get more of it in the near future. The last thing someone that doesn't have money needs is for someone to give them an incentive to spend when all it will really do is make the situation worse in the end. The car companies knew things were drying up years ago. If they didn't, they should have. Once things were 0% APR for so long, anyone that wanted a new car, bought one. Now, the only way that things keep rolling is to offer even greater incentives that, in the end, will leave people more in debt than they were before. Sure, you are saving $4500, but you also now owe another $20k on a car that is now worth $18k. Not much that different than pushing credit cards. Purchasing will temporarily increase but the fallout is still yet to come. Let's see how many of those "Cash for Clunker" loans end up defaulting.

As far as the foreign/domestic car thing, that line has gotten really muddy in the last decade. There are some "American" cars that are not made in the U.S. and some "foreign" cars that are.