Senate keeps car sales stimulus in war bill

WASHINGTON (Reuters) - The U.S. Senate rejected on Thursday an attempt to strip a $1 billion program aimed at spurring flagging U.S. car sales from a pending $106 billion war funding bill.

The Senate voted 60-36 to keep the program that would provide vouchers of up to $4,500 for consumers to trade in their less fuel-efficient cars for ones that get better mileage, a program known as "cash for clunkers."

Republican Senator Judd Gregg had raised an objection to including it in the legislation because it did not include cuts elsewhere to cover the costs. He also complained the program also was not in the original versions of the war funding bills that the Senate and House of Representatives passed.

"There are innumerable places in this government, which is spending trillions of dollars a year, to find $1 billion to pay for this bill if it was a priority," Gregg said during the floor debate.

The federal deficit is expected to reach $1.8 trillion this fiscal year, but other lawmakers emphasized that the autos program would cut pollution and stem job losses.

"We've seen the largest decline in automobile sales in 50 years," said Democratic Senator Richard Durbin. "Plummeting auto sales have reduced production and it's had a ripple effect across the economy, forcing dealerships and factories to close."

A few senators complained that the requirements for improved fuel efficiency in the program were too small, as little as two miles per gallon, and tried unsuccessfully to push a more stringent program.

The overall bill, which is primarily focused on funding the wars in Iraq and Afghanistan through September 30, is expected to pass the Senate later on Thursday. The House approved the war funding bill on Tuesday.

(Reporting by Jeremy Pelofsky and John Crawley; Editing by Tim Dobbyn)