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More on the Negatives of Increased CAFE Standards

Anthony Randazzo
May 20, 2009, 11:33am

Yesterday, the fuel standards hammer dropped. Today, the outcry of voices. Here is a run down:

Keith Hennessey drawing on data from the National Highway Traffic Safety Administration: 

"Rather than maximizing net societal benefits, [the Obama] proposal raises the standard until (total societal benefits = total societal costs), meaning the net benefits to society are roughly zero...

The Obama plan will increase costs enough to further suppress demand for new cars and trucks. This will cause significant job loss, and probably in the 150K range over 5-ish years, with a fairly wide error band...

The Obama option would reduce the global temperature by seven thousandths of a degree Celsius by the end of this century....[and] would reduce the sea-level rise by six hundredths of a centimeter.  That’s 0.6 millimeters." (And that's not really a lot of bang for the buck. Emphasis added.) (HT: MR)

The Wall Street Journal breaks down the plan's flaws:

"All that's left to arrive at the President's new destination for the American way of driving are huge, unanswered questions about technology, financing and the marketability of cars that will be small and expensive... 

[A National Highway Transportation Safety Administration] 376-page report notes that 'the resources used to meet overly stringent CAFE standards... would better be allocated to other uses such as technology research and development, or improvements in vehicle safety.'

[...] All solutions to this problem flow from Washington. One would be to give substantial tax subsidies to buyers. Another would be to impose a federal gas tax to jack up the price of gasoline to $4 per gallon and keep it there."

Holman Jenkins rips into the plan:

"With his latest installment of ever-higher fuel mileage requirements for the auto industry, Barack Obama embraces a momentary, crisis-spawned expansion of the art of the possible, unleavened by any art of the rationally desirable... 

So far, the Obama administration has yet to lay out its magical thinking on how the homegrown auto makers are to become "viable" when required to subordinate every auto attribute that consumers find desirable in favor of achieving a passenger-car average of 39 miles per gallon by 2016. Nonetheless the answer has quietly seeped out: Taxpayers will write $5,000 or $7,000 rebate checks to other taxpayers to bribe them to buy hybrids and plug-ins at a price that lets Detroit claim it's earning a 'profit' on its Obamamobiles.

Mr. Obama was supposed to be smart. His administration was supposed to be a smart administration. But the policy coming out has not been smart. It has been a brute shifting of power to the president's political allies... With no overarching philosophy in evidence, the art of the possible has come to define the Obama administration. One thing that has proved possible is an untrammeled power grab over the auto industry." (Emphasis added)

The New York Times reports:

"Why, after decades of battling, complaining and maneuvering over fuel economy standards, did carmakers fall in line behind the tough new nationwide mileage standard President Obama announced Tuesday? Because they had no choice... Simply put, Detroit and the other companies need Washington’s help, and they are powerless to block the rules Washington dictates.

Also see the sarcasm of Cafe Hayek, the Economist, and National Review. And my post yesterday.

In the end, WSJ (again) sums up the story best: "One thing seems certain by 2016: Taxpayers will be paying Detroit to make the cars Americans don't want, and then they will pay again either through (trust us) a gas tax or with a purchase subsidy. Even the French must think we're nuts."


Anthony Randazzo is Director of Economic Research


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