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Friday, August 21, 2009

5 Downsides to 'Cash for Clunkers'

U.S.News and World Report has an interesting article on the unexpected - by Congress - consequences of the Cash for Clunkers program.
August 06, 2009 02:44 PM ET Rick Newman

Eureka! Stimulus works! The first $1 billion allocated to "cash for clunkers" rebates apparently helped boost car sales by more than 250,000 vehicles, bringing some much-needed cheer to depressed auto showrooms. So Congress added $2 billion to the program, which by extrapolation could increase sales by more than 750,000 units overall. Carmakers are gleeful. And the Obama administration finally has some concrete evidence that extravagant government spending occasionally moves the needle.

But the buying spree, fueled by government rebates of up to $4,500, may not be quite the economic boost it appears to be on the surface. And there will probably be some of those pesky unintended consequences. Here are a few reasons that cash for clunkers is likely to look a lot less successful when seen in the rearview mirror. (more)

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