Tracy Press

With the Bush administration’s support, Congress is pushing to increase fuel economy standards for American autos. The measure is supposed to save energy and reduce America’s dependence on foreign oil, but these rules have proved far more effective at increasing automaker costs and killing drivers.

In 1975, Congress concocted the Corporate Average Fuel Economy standards program, which set the average fuel economy for each automaker’s entire vehicle fleet. It’s a nutty approach only a bureaucrat could love.

First, CAFE put America’s auto industry at a disadvantage because U.S. producers concentrate on the larger cars that Americans liked to drive. Today, American automakers make most of their money from light trucks, including SUVs, which outsell smaller cars. The administration’s new CAFE rules for light trucks are expected to cost the three U.S. automakers about $2 billion — and their Japanese and European competitors nothing.

Second, CAFE is supposed to cut total energy use, but it actually creates an incentive to drive more, because higher mileage reduces the cost of driving. As a result, conclude economists Randall Lutter and Troy Kravitz, CAFE “increases vehicle miles traveled, thereby boosting traffic accidents and congestion. The increase in the costs of accidents and congestion fully offsets and probably outweighs the social benefits resulting from greater fuel economy.” The number of miles driven by cars and light trucks more than doubled between 1975 and 2000.

Third, meeting CAFE standards raises automaker and consumer costs by forcing companies to make cars that people don’t want. Numerous high mileage vehicles are available, but many people prefer larger cars for a variety of reasons. That has forced U.S. companies to lower prices on smaller vehicles — selling many at a loss, since hiking sales is the only way to comply with CAFE — and increase prices on larger vehicles.

Moreover, raising prices for lower-income families who need a larger vehicle likely causes some of them to hold onto their older autos, which have lower gas mileage — further undercutting the objective of reducing energy consumption.

Fourth, and most important, CAFE kills. Design modification and materials substitution can make cars lighter and safer, but doing so costs money and it is not easy to do both simultaneously. The easiest way to improve mileage is to cut vehicle weight, but reducing the amount of metal surrounding drivers and passengers leaves them more vulnerable in an accident. In 2002, the National Academy of Sciences reported that CAFE kills an extra 1,300 to 2,600 people a year.

Alas, the dumber the idea in Washington, the more support it seems to receive. The Bush administration, after doing nothing for years, now advocates raising CAFE by 4 percent annually. The Senate has voted to hike the level to 35 mpg in 2020, up from 27.5 mpg and 22.5 mpg for cars and light trucks, respectively.

The U.S. auto industry is set to spend $2 billion to comply with new fuel economy rules for light trucks. The Senate bill would cost U.S. automakers — already suffering from huge legacy costs from previous generous pension and health insurance contracts — another $114 billion to retool their assembly lines.

“Almost no one outside the fuel-economy business understands how incredibly tough, probably impossible, and enormously expensive that really would be,” said Gary Witzenburg of the automotive Web publication Car Connection The only way to meet the proposed standard, he adds, “would be to dieselize and hybridize virtually everything — at an incremental cost (not retail price) of $5,000 to $8,000 per vehicle — and downsize trucks to where they could barely haul the contents of a homeless auto worker’s shopping cart.”

Yet even accepting the flawed assumption that the legislation would cut oil use by 1.2 million barrels a day, the energy benefits would be minimal. Explains Jerry Taylor of the Cato Institute: “Given that the Energy Information Administration thinks world crude oil production would be 103.8 million barrels a day by 2020, the reduction would be 1.2 percent of global demand and result in a 1.3 percent decline in price — nowhere near enough to defund terrorists, denude oil producers of wealth or secure energy independence.” 

The main alternative comes from Reps. Baron Hill, D-Ind., and Lee Terry, R-Neb., who would maintain separate standards for autos and light trucks, hiking the levels to 35 mpg and 32 mpg, respectively, by 2022. This “moderate” approach would wreck the industry, kill people and limit consumer choice only slightly more slowly, while having even less impact on energy use.

Fuel economy should be left to the marketplace. The only real curb on high energy consumption is high fuel costs. As prices rise, people drive less and switch to more fuel-efficient vehicles.

Washington has come up with a lot of bad policies over the years. Few are worse than CAFE — and the White House and Congress are working to make it even worse. If they succeed, it might well be curtains for the U.S. auto industry.

Doug Bandow is the Bastiat Scholar in Free Enterprise at the Competitive Enterprise Institute and vice president of Policy for Citizen Outreach. He was a special assistant to President Ronald Reagan.

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written by Mark Davis , December 04, 2007

Oh, are these the CAFE antagonists? They mention the 2002 NAS report but don't bother to note the dissent in the same report concerning death rates:

http://www.nap.edu/openbook.ph...2&page=117

Why should they? A balanced discussion would acknowledge the limitations of their claims, but that would just end in truth and nuance, rather than pat ideology. And why exactly is there limited impact on foreign manufacturers versus the US industry? Toyota invested heavily in hybrids and has flourished because they predicted the demand in China/India and the consequences on the global market. How can CATO and friends support protectionism for bad domestic industrial decision making?

One of the issues, however, that Doug doesn't discuss is the reduction of emissions associated with CAFE standards. Emissions affect the commons of our shared environment and are a topic where a balance between environmental interests and free-trade enthusiasts serve the public good.

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written by scott hurban , December 04, 2007

Well Mark aren't you the pot calling the kettle black when it comes to not presenting both sides. I looked up your miracle German medical care and found quite a few things you neglected to mention. First of all, the main reason given for there good medical care has nothing to do with their government delivery system, but the fact they have more doctors per capita than we do. I mentioned that in a prior letter that if we took the power to limit doctors away from the AMA and had ort reform, we would end up with more doctors and a better system just like our pals the Germans. You also forgot to mention that the German people are more negative about their system than americans are about theirs. Also mentioned is that it is generally accepted by all political stripes that the system is headed for financial disaster.

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written by scott hurban , December 04, 2007

Mark,

The next time you throw arrows at a perfectly logical presentation of the facts, make sure you're not doing what you accuse others of. However, don't worry. Public education as sufficiently dumbed down the population that government will continue to destroy the American car business as we slowly go the way of Rome. There are too many generally poor and ignorant people that don't know any better who will vote Democratic. Besides loving to teach, I joined the public sector secure in the knowledge that government will continue to destroy American business and give advantage to the emerging nations like China, India, and other Asian nations
who have unshackled their people and free enterprise without meddlesome government. If my wife was not so enamored by America, I think Singapore would be a nice place to live as they are one of the emerging economically freedom loving nations. I don't care about their government as long as they take little and have enough sense to leave people alone.

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written by scott hurban , December 04, 2007

Sorry for a few grammatical errors

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written by Mark Davis , December 04, 2007

Good to see you reading something, Scott! You can refresh your memory, however, as to my specific claims: the German medical system delivers better care according to a broad array of measures at less than half the cost per capita and does not suffer from significant rationing of care. I never claimed it was perfect. France has similar performance figures (and note the physicians per capita figures):

http://www.ofamind.com/ofamind...hp?&id=538

There is no indication that there is a financing disaster on the horizon for German health care; the only issue is essentially identical to the US as to who will pay (but pay much less). The issue of public dissastisfaction with the German system is a very interesting point, I agree, and the primary source appears to be that the public thinks doctors prescribe too much medicine because they are financially incentivized to do so, much like the US system!

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written by Mark Davis , December 04, 2007

Finally, tort reform is largely irrelevant to the issue of health care, and has been acknowledged as such:

The cost of defending U.S. malpractice claims is estimated at $6.5 billion in 2001, only 0.46 percent of total health spending.

Source: http://content.healthaffairs.o...t/24/4/903

Now, in terms of balance, there are regional differences in provider availability based on tort limitations that affect insurance rates, but these effects aren't enough to offset the chronic growth of medical costs in the US!

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written by Mark Davis , December 04, 2007

It's sort of amusing to be spending so much time on arguing these issues, though, Scott. I can envision you being arrested for spitting or for free speech offenses in Singapore and longing for home. I can imagine you being arrested for your religious beliefs in China, as well. You can discuss economic liberalization with imprisoned Tibetan monks.

I recommend some travel before reaching too hasty conclusions about just about anywhere.

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written by Steve Reshakis , December 05, 2007

Scott! thats the Scott I Know!!!!

You Go BOY!!!
Mark Davis Loves to have His cake and eat it too....

typical Leftist excuse maker.

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written by Flash , December 20, 2007

If I cannot buy the new car I want, I WILL keep my existing one even longer.
If a large car becomes much more expensive to buy, it will be more economical to totally rebuild an older passenger car or SUV to extend its life dramatically.
If full size trucks become unavailable, there will be a market for, and scores of rebuilt 1973-1987 and 1988-1998 GM/Chevy trucks returning to the road. i can take a 1987 and replace every part except the cab shell with all brand new parts all available. i may be able to do that cheaper than buying a new one.
If Cuba can manage to maintain a 50% fleet of pre-1960 vehicles on the road, so can I.