Beyond the news element to this story, it also answers a question you may have thought of, “What happened to the family station wagon?” or “When did the station wagon become the SUV?”
What do you think?
Why does President Obama want to preclude Americans from buying bigger, safer, vehicles, mostly made by domestic auto companies, who need all the business they can get? Motorists should be allowed to pay the cost of cars and the fuel to run them, including taxes to reflect costs imposed on society.
Yet earlier this month, using authority granted in the 2007 Energy Act, Mr. Obama announced that automakers will be required to achieve a higher Corporate Average Fuel Economy standard, 35 miles a gallon by 2016, four years earlier than Congress had mandated, rising from 27 MPG now for cars and 22 MPG for light trucks. Enacted in 1975, CAFE requires automakers to calculate average fuel economy--miles per gallon--across their fleets.
Never mind that the 35 MPG CAFE standard, calculated by the Transportation Department, corresponds roughly to a 26 MPG Environmental Protection Agency standard, the measure that is found on window stickers of new cars. This is met already by 29 car models and 36 truck models. Half these trucks and one third of the cars are made by domestic automakers.
This discrepancy in MPG arises because for CAFE the Transportation Department tests the vehicle on a dynamometer, a machine designed to measure fuel intake in a repeatable pattern that is not the same as ordinary driving. This yields better “mileage” than would the EPA measure of driving over the road.
Hence, there was less to Mr. Obama’s announcement than met the eye--or made the headlines.
Whatever the true MPG measure, CAFE standards aren’t the best way to increase it. If Mr. Obama wants Americans to use less gasoline--a goal that many don’t share--he should propose a gasoline tax. Last summer, when the price of gasoline climbed above $4 a gallon, Americans cut back on their driving—with no extra CAFE standards.
Paradoxically, Mr. Obama’s increased CAFE standards may have the unintended effect of encouraging motorists to hold on to their older gas guzzling cars, as new models become more expensive. In contrast, a higher tax would create incentives to turn over the auto fleet more quickly, as drivers choose more fuel-efficient models.
Motorists should be allowed to choose between purchasing more safety with a larger car, or saving fuel by buying a smaller car. Other things being equal, heavier cars will be safer. Data show that fewer fatalities occur when large cars hit each other than when small cars do the same. In crashes between small and large cars, small cars’ occupants are at a disadvantage.
And poor people will be the most likely to get hurt under Mr. Obama’s new regulations. University of California (Santa Barbara) economics professor Stephen DeCanio in a telephone conversation yesterday declared, “CAFE standards are regressive. They put an undue burden on those who are low-income, who will buy cars that are smaller and less safe. Speaking as someone who is in favor of reducing greenhouse gas emissions, CAFE is not the way to go.”
The first CAFE standards, according to a 2002 National Research Council study, resulted in 1,300 to 2,600 more Americans killed on the roads in a typical year, because cars were lighter. If a toy manufacturer had killed that many children in a year the company would go out of business.
After dead motorists, the biggest losers from higher CAFE standards are Americans who prefer large vehicles to carry families, equipment, and pets on daily trips or long vacations.
One reason that Congress does not want to tax gasoline is that taxes are unpopular. People see taxes, whereas they do not observe the costs of CAFE directly. Despite Mr. Obama’s many calls for transparency in government, CAFE standards hide the costs of the regulation, contributing to poor governance.
Furthermore, CAFE regulations yield no revenue that the government could use to make infrastructure investments, engage in research and development, lower income taxes, or cushion the effects of the cost of the emissions reductions on low-income Americans. A gasoline tax, if accompanied by decreases in income taxes, could be revenue neutral. Low-income Americans who do not pay taxes could receive credits from the revenues to be used against the purchase of gasoline.
By yielding to Congress’s unwillingness to raise gasoline taxes and relying on regulations to increase gas mileage, Mr. Obama offers no incentive for manufacturers to exceed the CAFE standard or motorists to reduce their driving. A tax, on the other hand, would create a continuing incentive to improve vehicle MPG and reduce miles driven.
In fact, CAFE standards may have contributed to lowering the fuel efficiency of the personal transportation fleet because light trucks were not covered. Manufacturers developed a new kind of “light truck,” the Sport Utility Vehicle, built on a truck chassis. Many motorists who could not buy large sedans or station wagons due to CAFE turned to SUVs, some of which had lower fuel efficiency than the prohibited sedans.
Automotive fuel efficiency has been rising without stricter CAFE standards as older cars are replaced with newer ones. If Mr. Obama wants Americans to use less fuel, a tax would be simpler, fairer, and more effective.
Diana Furchtgott-Roth is a senior fellow and director of Hudson Institute's Center for Employment Policy. She is the former chief economist at the U.S. Department of Labor.