Unintended consequences strike again!

My parents recently turned in their 1990 GMC minivan for a Sebring, getting the full $4500 dole for the clunker, and matching funds from the government again through its Chrysler storefront, for a total of $9000 off a $26,000 sticker price. My dad felt a little bad about the welfare aspect of the thing, but getting 35% off a major purchase helped salve the wound. Especially considering that he was already put on the hook for some several hundred dollars by the Obama administration when they (illegally) took over the car companies; and he's also on the hook for his $3000 or so contribution the bailout that is probably funding the financing of his car. He probably doesn't break even on the exchange if you add in enough pork.

My aunt and uncle heard about this, and decided to turn in their Sedona to trade up. Turns out, by the binary and arbitrary cutoffs, it gets 1 mpg too much. Now, some math. Let's say they got the car in 1999 for simplicity. Say they drive 15,000 miles per year. And say the Sedona gets 21 mpg, and the cutoff is 20 mpg. They would have saved about $1000 over the ten years on gas at $3/gallon. So, thanks to government changing the rules, my aunt and uncle lost $8000 by buying a fuel-efficient car. In fact, they could have bought an Escalade at 13 mpg 10 years ago and come out even! No doubt that will make them think twice next time they are in the market for a new car.

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