Auto Irony

One of the chronic concerns with regulatory initiatives is that politicians rarely have to accept responsibility for the costs of the regulation that they impose.  Much has been made of the role that government played in encouraging sub-prime lending through the CRA (Community Reinvestment Act).  It is truly dismaying to see those who helped cause the problems now positioning themselves as the public’s saviors (using taxpayer dollars).  Now it is evident in the proposed automobile manufacturing bailout as well. 

One of the main proponents of a Detroit bailout is Senate Majority Leader, Harry Reid.   Yet, just over one year ago, when defending increased mileage requirements, he argued, “The time has come for us to speak for the American people and not the car manufacturers,” according to the NY Times of June 23, 2007.   So I guess now, he’s proposing the opposite?  I don’t mean to pick on Senator Reid — the vote that increased mileage standards won bipartisan support in the Senate.   The issue is a regulatory process that all too often assumes that regulations have no cost, and where there is little accountability for those who impose those costs.  Too often, too, our policymaking is a knee-jerk reaction to current events, rather than following a coherent strategy (Michael Porter proposes just such a sensible blueprint).

This is not to argue that regulation was the principle determinant of Detroit’s miserable state, merely a contributory factor.   Further, I can understand that there can be societal reasons to try to lower per capita fuel consumption — but the least distorting way to do this would be to tax fuel and let the consumer decide how to conserve.  This would require a level of honesty and open debate that is too rare.  Such a direct approach would also create a level of accountability that makes such a path all too unlikely.

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2 Responses to “Auto Irony”

  1. sam Says:

    The fuel tax makes sense with respect to influencing the long term consumption of average Americans (and many truly don’t need those large SUV’s), but I can’t help but wonder what impact it might have on the costs of goods and services and our economic recovery. For instance, I believe that when the price of fuel skyrocketed, shipping surcharges were added that essentially raised prices across the board. Modern farming is also fuel intensive, and consequently the cost of food production has increased along with the price of transportation and processing.

    I guess my concern with the fuel tax is whether or not there would be any unforeseen negative economic consequences (consequences that might even unintentionally push more production to countries with lower energy costs).

  2. able Says:

    How does a bailout of the Big Three make economic sense. Three quick examples.
    They have a high cost structure where a union auto worker receiving approximately $80.00 per hour in salary and benifits to put lug nuts on the tires, and then are trying to sell that product to a consumer scraping by on $15.00 per hour.
    They have $1600.00 in cost associated with each unit just to pay their retirees benefits, and as more retire, that cost keeps going up.
    Also, if they close a plant, the fired workers for the next two years receive full pay not to work.
    That’s not a business, thats a good ole boys club.
    The problem is, like any good ole boys club, times have changed, and they either don’t want to, or are incapable of changing to meet the new reality of the Japanese auto makers using US plants and US workers to kick their butts in the US marketplace.
    Since all good ole boys clubs are based on who knows who, and who scratches whose back, they turn to the politicians,who are professional bloviators, and can eloquently make the argument to bail their sorry butts out.
    The unvarnished truth is that the american taxpayer is going to pay these companies by either buying their overpriced, inefficient product, or, the american taxpayer is going to pay these companies via the tax mechanism and Washington D.C.
    Lastly, what happens three years from now when the chinese start sending over cars that are the same quality as the big three, but they only pay their workers $5.00 per hour and a big bag of rice?

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