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Opening Arguments

Close the CAFE

Corporate Average Fuel Economy (CAFE) standards for cars and trucks haven't been raised in quite a while. But now, big changes are in the works, and it naturally worries people in the auto industry:

The Big Three automakers believe such strict requirements will be extremely expensive to implement and ultimately will lead to the loss of jobs and fewer choices for the consumer. 

Those in favor of the current legislation say it will help reduce the U.S.'s reliance on foreign oil.

If you click on WANE-TV's video, you'll see more details, including the claim that raising CAFE standards 40 pecent by 2020 would cost automakers $114 billion, including $40 billion at GM alone. That might be exaggerated -- such figures often are. But there would be costs, and they would be passed along to consumers.

Personally, I think I might eliminate CAFE standards rather than strengthening them (warning! economics argument coming). In 1974, the average American car consumed 13 mpg. As CAFE standards prompted by the OPEC oil embargo kicked in, that went to a peak of 22 mpg, and today the average is 21 mpg. And what has happened between 1974 and today? We now have twice as many cars and trucks as we did then, and we drive them three times as many miles. (The figures are from an article strongly supportive of CAFE, so I accept them as true.) If the standards are raised to 30 or 35 mpg, what do you think would happen?

Anything that lowers the price of doing something -- as Democratic calls to suspend the gas sales tax would for driving, as CAFE standards do -- will prompt people to do it more. And the more the price is lowered, the greater the demand will be. That means more gas used, not less, and, unless we start doing something about domestic supplies, even more dependence on foreign oil.

Or am I missing something obvious?

Posted in: Uncategorized


Tue, 06/19/2007 - 5:30am

It seems like your hypothesis assumes that people are just driving for the hell of it, more or less. Or, I suppose to keep with the economics angle, assumes that the demand to drive miles is elastic. I wonder if the total miles driven is more of an inelastic number. Sure, some driving is just joyriding or vacation riding, but a substantial amount of the miles are simply what are required to perform a task -- get to work; deliver goods; etc. Some of those tasks can be performed in other ways -- manufacturer the goods closer to their destination, work closer to home.

In any case, I would suppose that the number of miles driven wouldn't increase or decrease all that much based on gas price (though other variables - relating to population and population density, for example - surely have an impact).

But, you know, I don't really have any "facts" to back up my suppositions.

Tue, 06/19/2007 - 8:48am

Hi Doug -- I do some work with the Alliance of Automobile Manufacturers and we believe that the the bipartisan Pryor-Bond-Levin-Voinovich Amendment, which would increase standards for passenger cars to at least 36 miles per gallon average by 2022, and would increase light trucks to at least 30 mpg by 2025, is an aggressive yet achievable step in the right direction. You can find out more by visiting http://www.drivecongress.com.

tim zank
Tue, 06/19/2007 - 12:44pm

Just wondering if anybody remembers those wonderful days (1974 through the mid 80's) when almost all U.S. automakers went under, and we had all those wonderful cars with 305 v8's coupled with chevette transmissions to meet cafe regs. Yeah those were the days....Why prolong it with higher cafe regs, just shut the doors to the factories now and the last one out hand the keys to the Japanese. (and turn out the lights)

Here's a novel idea. Do away with cafe regs and let gas prices go where they will, and let the manufacturers make what they want. The market will take care of itself, fewer people will drive and pollution would be reduced.

Can anybody make a case (with a straight face) that having the government involved in anything (besides security) is working?

Wed, 06/20/2007 - 5:17am

Folks seem reasonably happy with Medicare. The Internet thing took off after some government nurturing (and busting up Ma Bell's monopoly.) I really like the roads. Fire protection is awfully nice. My public schools were pretty functional (though many others are not.) The courts seem to do a good job of enforcing contracts and keeping interpersonal violence in the U.S.A. to a dull roar.

But, it would be interesting to remove every single subsidy --direct and indirect -- from automobiles and gas and see what happens. That being said, I do have fond memories of my '78 Chevy Impala wagon. Horribly gas inefficient, but man did that engine roar.