Tuesday, August 04, 2009

Too Successful?

The cash for clunkers program is a big success. It got people switching up clunkers for more fuel efficient vehicles (helpful long term), spurred auto sales (needed short term), and improved the well being of some consumers (getting into new cars). It worked so well, they ran out of money and now is being re-upped by Congress.

Of course, the only issue with cash for clunkers is the moral hazard. It's rewarded "bad behavior" by assisting those who drove inefficient vehicles over say, the person who traded-in their clunker in the past couple years. The program is taking tax payer money and redistributing it to the auto industry and folks who drove piece-of-shit cars.

Is it fair?

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