The new rules match California’s desired requirements and will make for a nationwide standard, but our writer asks, “Wouldn’t an increased gas tax do the trick a lot more efficiently?”
By Brendan Moore
Most, if not all of you are aware that this increase will be announced today; you know because it was leaked by the Obama administration everywhere yesterday, and it was front-page news in all the major newspapers, internet sites and on television.
And the internet sites of newspapers and auto blogs are filled with comments about the plan to increase the mileage and emissions requirements, with a wide spectrum of viewpoints. There are people that say global warming doesn’t exist, people that say that we have plenty of oil, there are people that say, yes, there is global warming but this will wreck the economy, there are people that say, yes, force those auto companies to make those fuel-efficient cars, it’s about time, there are people espousing their belief that the fabled 100 mpg carburetor or special engine or special fuel injection has existed for years and the auto companies have simply withheld it from the public because they’re in cahoots with the oil companies, etc.
Don’t you just love the public?
Just to refresh your memory, the new plan calls for average fuel standards for all new passenger vehicles would rise by 10 miles a gallon over today’s performance to 35.5 miles per gallon between the years of 2012 and 2016. That’s cars and trucks together. But, the new required fuel mileage for trucks is only 24.1 mpg, which is a mere 2.2 mpg over the current standard. The new standard for cars is anywhere from 39 mpg to 41 mpg (depending on whose numbers to believe) – the old standard was 30.2 mpg.
The future vehicles are also expected to put out a combined 30% fewer emissions.
Quickly, what does having two very different mpg standards, one for light trucks and one for cars, mean in the real world?
If you said, “light truck sales will go up”, you get a stuffed animal. And go up they will, unless the price of gasoline also goes up to previous levels of $4.50 USD per gallon. Why? Because Americans generally buy the largest vehicle they can afford, and there is no reason to think that behavior is going to change. Light trucks include pickup trucks and SUVs, and most crossovers.
Adding to the reasons that Americans will buy bigger is that these new fuel-efficient cars will cost much more than the same size cars do now – the technology to increase fuel-efficiency also increases price. The light trucks won’t cost much, if any more – 2.2 mpg increase isn’t a big increase, folks.
To their credit, there are people on those aforementioned blogs advocating an increased federal gas tax. I’m also in that camp; have been for decades. I believe a much higher gas tax is the best solution for the twin problems of increasing fuel efficiency and decreasing emissions.
Because most Americans are not going to use less gas, buy fuel-effiecient cars, buy electric vehicles, etc. because it’s “the right thing to do”, they’re not going to do something for ideological reasons. Americans tend to react to economic drivers, not moral imperatives. If gasoline costs $5.00 a gallon, I can guarantee that Americans will shun light-use trucks and SUVs as commuter cars, I can guarantee that, in their next car-buying cycle, they will buy smaller cars that get great fuel economy and I can guarantee that they will want hybrids and electric vehicles. I can also guarantee that they will use less gas in whatever vehicle they have now.
I’ve heard over and over again why a gas tax is the work of the devil – how about a contrary view?
Let’s take a look at some of the reasons people are putting forward to justify a raise in the tax. In no particular order of importance, those reasons are:
Our physical safety – In order to buy all of the oil we need, we currently pay huge amounts of money every day to people that regard our nation as satanic and evil. It doesn’t stop there. There are millions of people in a sub-group of this group that would relish the opportunity to kill as many Americans as possible. Every dollar we send to them gives them greater opportunity to exercise savagery against the United States. Less gas consumed means less barrels of oil bought from people who wish to use the money they get to destroy our country.
The increasing budget deficit – As many noted economists have pointed out, we’re going to be in a very bad way as more and more baby boomers retire and start receiving social security and medical benefits. It will be the equivalent of a slow fiscal cancer, wasting away the country’s health bit by bit. We cannot keep doing what we’ve been doing from a tax perspective and expect everything to turn out OK. It is an economic impossibility. Either taxes have to go up, or benefit payouts must be drastically cut. Most economists agree that even a $1 gas tax increase would result in an extra 100 billion dollars annually, thereby providing some measure of relief to future budget shortfalls. If you don’t’ want the extra tax revenues to go there, then you pick a line in the budget – schools, roads, Medicare, whatever.
It’s only fair from a cost perspective – The U.S. federal government has spent and still spends a lot of money ensuring that the oil keeps getting pumped out of various places in the world. This money is spent in the form of wars waged (1991 Iraq War, current war in Iraq, etc.), massive foreign aid to non oil-producing countries that we wouldn’t otherwise care so much about in oil-producing regions (Egypt, Israel, etc.) in order to have an ally and/or influence in those oil-producing regions, and various government subsidies and tax breaks to the oil industry and it’s collection of vendors and suppliers. If all those costs, which are borne by all taxpayers, regardless of their personal consumption of gasoline, were accurately imputed into the costs of gasoline, gasoline would be far more expensive.
Less pollution – Without belaboring the point too much, it cannot be disputed that Mother Nature is allergic to the stuff that comes out of a tailpipe. Less of that bad stuff around helps all of us here on this planet.
Less traffic – Less people driving means the ones left on the road can go faster. This is good, especially from my admittedly biased perspective as an auto enthusiast, but it will also save billions in shipping costs, etc..
It won’t cost as much as you think – As N. Gregory Mankiw, the noted Harvard professor and former chairman of The Council of Economic Advisors, stated in a Wall Street Journal article regarding gas taxes, there is something called tax incidence taught in every freshman tax analysis course. Tax incidence states that every tax cost is shared by both producer and consumer. The short version as it applies to this situation is that as a higher gasoline tax drives down consumption, market demand will subsequently fall, forcing oil prices lower. Just like magic, the actual purchase price of gasoline would increase by less than the tax because the cost of the major ingredient would be decreasing at the same time. More beautiful magic – as a practical matter, oil producers like Iran, Venezuela, Russia, and Kuwait pick up some of the cost of our increased tax gas.
It will produce a long-term solution to our oil addiction – As gasoline becomes more and more expensive, alternative fuels and alternative power modes become progressively more attractive and economically feasible. As a bonus, some of these alternatives are better for the environment, i.e., the Tesla, a very fast, very attractive sports car powered by ion-lithium batteries with a 300 mile range, and built by the Tesla Corporation in Silicon Valley. Too cutting edge? How about the proven technology of a hybrid vehicle?
It helps the auto manufacturers – Crazy talk? No. Reducing the importance of currently onerous regulatory oversight (fuel mileage requirements) by replacing it with market forces and increasing market certainty (American consumers will want fuel-efficient vehicles in ever-increasing numbers) is a dream come true for car companies, particularly the domestic ones. It is an oft-told lie that the domestic manufacturers cannot make any good vehicles except trucks and SUVs; the focus has been on those products in recent years because that’s what a lot of Americans wanted to buy, the vehicles themselves were highly profitable, and frankly, the domestic manufacturers needed the money. This was without a doubt a short-sighted strategy in retrospect, but one that never would have been followed in an environment of steadily rising gas prices with no possible return to cheap gas. With such market certainty, what’s left of the domestic auto manufacturers will quickly embrace production of high-quality fuel-efficient vehicles as well as alternative fuel vehicles. Don’t believe it? Well, when you have a guy like Bob Lutz of General Motors stating a few years ago at the Paris Auto Show that one of the best things that could happen in the U.S. would be a gradual increase in the price of gasoline to the same levels currently in Europe so GM can just get on with the business of making fuel-efficient cars, then you know just how important market certainty is to the automakers. Let’s face it – cheap gas in the US is what made the vehicles made in the US impossible to sell in any other major market in the world, since the vehicles produced in America could only be driven in a place where gasoline was ridiculously cheap. Since most astute people in the car business believe that the U.S. market will look very much like the market in Europe in the future (smaller, more profitable shares of the overall market led by a couple of market leaders), gas prices going up would simply accelerate the ability of Ford, GM, and the new (hopefully improved) Chrysler part of Fiat to focus on the future. By the way, in order to achieve price parity with Europe currently, gas prices in the U.S. would have to increase more than $4 per gallon. Tomorrow.
We can make it tax-neutral – Are you screaming, “No more taxes”? No problem. Since reducing fuel consumption is extremely important to the welfare of the United States, we will offset the tax on gasoline by reducing some other tax, like the income tax rate. Is there any better way to demonstrate just how important reducing fuel consumption is to this country?
So, after all this, you might reasonably say to yourself, “gosh, why isn’t there an active discussion about raising the gas tax”?
Because it is considered political suicide for any elected official to put forth the idea of a gas tax, that’s why. So, instead of something that will actually work, and work quickly, like raising the price of gasoline at the pump, we get government regulations like CAFE, which forces the automakers to make what the government says, but doesn’t force consumers to buy those cars that the government forced the automakers to produce. CAFE is idiotic. It is a flimsy excuse for a solution to a very pressing problem.
Give consumers a reason to burn less gasoline. Make gasoline more expensive then it is, and you’ll see a quick migration towards more fuel-efficient cars. Don’t resort to the federal government forcing the manufacturers to build cars and trucks that meet certain fuel economy standards. Simply raise the gas tax and then let consumers decide for themselves how much they want to pay to drive their vehicle to work, to soccer practice, to the airport, etc.
Just imagine if gasoline costs $5 a gallon in the US. There would be waiting lists for hybrids, for EVs (electric vehicles), small 45 mpg cars, diesel cars, propane-powered cars, etc. Most SUVs and light trucks would disappear from our roads as those vehicles would be used only by businesses and the occasional private citizen. A lot of the large crossovers would also go away as people made good economic decisions about just how much vehicle they actually needed.
And, just for the record, I have no problem with increased emissions requirements, but it may be a moot issue once gasoline consumption falls dramatically.
Will an increase in the federal gasoline tax happen, since it is the logical way to achieve our national goal of reducing gasoline consumption?
C,mon, you and I both know that answer.
COPYRIGHT Autosavant – All Rights Reserved