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.