So this is good news for the atmosphere in the short-run, but in the long-run this will encourage more driving and less reliance on mass transit. It seems highly likely that this program will work against the administrations efforts to -promote transit and mass transit seems pretty key to a low energy future. Meaning that the atmosphere my suffer in the long-run. While good for consumers, this program is probably bad for transit.
Regardless, the program does seem to be having its intended first-order benefit: US automobile manufacturers are seeing huge increases in sales. But this massive transfer of American's tax dollars is benefitting all car companies, not just American companies or cars made in the US (to do so would create some sticky trade policy problems).
I have a better idea, how about a carbon tax where the proceeds go to fund research and development of newer more efficient automobiles, transit and renewable energy?