CAFE Standards to Add To Cost of A Car

Earlier this summer the Obama Administration hammered together new MPG standards for the auto-industry. By the year 2025 the industry-wide mileage standard will be 55.4 MPG for passenger cars. As expected, folks from the auto industry balked at the increases saying that this will increase the cost of building these vehicles which would then be passed along to consumers.

It even looks like President Obama’s National Highway Traffic Safety Administration and the EPA agree with the auto industry. These agencies predict that…”CAFE standards would add an average of $2,000 to the price of each new passenger vehicle.

Comment Response

While clicking through my local newspapers this morning, I came across this linked article. In it the writer makes his case for how the federal budget crisis we are currently under had its roots in the spending practices of the previous administration, while barely casting any blame on the current administration. As I read through his column, I began to formulate a response that I was going to post in the comments section. However, the more I wrote, the longer the response. So I decided rather than post it where my readers might not be able to find it, I will put my response here.

Enjoy

OK, decent article that has obviously been researched. But Talton, as a journalist you should that numbers and figures are journalism 102 (101 being who, what, when, where, and why (or how)). The statistics did make the point that spending is out of control, and the wars didn’t help matters.

They have been fought on credit (Iraq and Afghanistan). Instead, President George W. Bush pushed through tax cuts, heavily weighted toward the rich, that added another $1.8 trillion in red ink – and this was before their extension under President Obama last year.

You kind of forget to mention that the tax cuts that favored the rich also coincided with a nice long run of economic prosperity after the recession brought on by the 9/11 attacks. Gross domestic product had an average rate of just under 4% (this includes 2009 which really screwed up the curve). Our unemployment rate hovered near 5%. In terms of strict numbers, it is quite possible the tax cuts did cost the US Treasury $1.7 trillion dollars.

But why don’t we look at this from another direction. Each state in the Union collects taxes for the state coffers. Some states collects taxes through sales taxes, other through income taxes, while others still collect taxes using a combination of both. While this might be comparing Red Delicious Apples to Granny Smith Apples, I think it is worth exploring. During the recent economic downturn the state of Washington has come up close to $7 billion dollars short in tax revenue because of unemployment and people pinching their pennies. ($5.5B actual, $1.5B projected). At 6.7 million people, The Evergreen State has just over 2% of the US population. If we were to project out this $7 billion and 2%, we can come up with a possible state level revenue shortfall of somewhere near $330 billion. Keep in mind this is only state level revenue generation, which is typically lower than the federal government (except for maybe California and we’ve seen how well they’ve done with all that tax revenue).

Auto Industry Holding the (Short) Straw

When you are holding a soda straw and trying to negotiate with someone holding a gun, you are not bargaining from a position of strength. When it comes to the new mileage standards currently under negotiations with the Obama Administration, the auto-makers are holding a straw.

Read my initial post on this subject here.

During negotiations, one of the key areas that the auto-makers are looking at is the different rules imposed by the state of California on auto-makers. This “tradition” extends back several decades, initiated with the requirement for the catalytic converter. It has continued over the years as California has required auto-makers to improve fleet gas mileage and requiring oil companies to have a so-called summer gasoline blend (costly at the pump and the refineries). The auto-makes want a concession from President Obama that rules will not be different between California and the other 49 states.

Here is where it gets a little complicated. California is a huge state with 55 electoral votes up for grabs. It has been a democrat stronghold in recent years. But that could change. A recent bill passed by both chambers, but not signed by Governor “moonbeam” Brown, would give the electoral votes to the candidate who wins the nationwide popular vote. So Obama has to tread carefully here. He needs the voters of California to pad his popular vote totals. But he also has to not piss off the rest of the nation. If he wants those 55 California electoral votes, he has to find a balance (which I hope eludes him).

But California setting its own emission standards also falls under a states right under the Constitution. If I am not mistaken, California environmental laws have already been challenged in court and California has won. And oddly enough, I support California’s right to mandate laws that regulate items in their state, as long as those mandates meet or exceed federal levels. But the cost of this additional rules and regulations are passed on to the consumer in the form of higher prices for autos, which are some of the highest in the US.

There are some that say the California requirements have driven innovation. That argument does have some merit. But the marketplace also drives innovation. The auto itself and improvements therein were driven by demands from the public. Family size caused auto-makers to come up with cars that would carry the gang. Those wishing for a statement car drove the sports car market. The need for utility brought about the pickup. None of these hugely successful innovations were driven by government mandate. The marketplace demanded, the auto-makers delivered.

It is technically possible to reach the 62 mps wanted by the Obama Administration? I don’t know. But I am fairly certain that under current technology, it will be difficult AND it will be expensive. This will be a cost that you and I will have to bear.

Anyways, with the auto-makers holing the straw, I don’t see how a president who fancies himself and his branch of the government above the rest will be willing to give on this condition.

Auto Industry Balks at Increase Mileage Standards

In case you are interested, there are negotiations going on right now that will have an impact on what kind of car you will be driving in the future and the cost of the that car.

The Obama Administration and the auto industry are currently working on vehicle and mileage standards, with the opening “bid” at over 56 mpg by 2025.

The Environmental Protection Agency, the National Highway Traffic Safety Administration and the California Air Resources Board, which has led the nation in setting rough standards, are proposing regulations that would require new U.S. cars and trucks to attain an average as much as 56.2 miles per gallon by 2025, roughly double the current level. That would require increase in fuel efficiency of nearly 5 percent a year from 2017 to 2025. (Source: Seattle Times)

…

Automakers say the standard is technically achievable. But they warn it would cost billions of dollars to develop the vehicles, and they express doubt that consumers would accept the smaller, lighter – and in some case, more expensive – cars.

I really have my doubts that folks in the Obama Administration give a dang about whether people will be willing to accept these cars. I think I can say with confidence that the prevalent thinking is “so what, if these are the only cars available, what are the rabble (that would be you and me) going to do, not buy a car?” Most of these people who are making these rules don’t live in the real world. These people have never had to work real jobs, jobs where people need trucks and the ability to haul their work with them. I would guess they have forgotten what it is like to have to haul your family around from school to practices to grandma’s house. You ride around in a limo often enough and you tend to forget that people actually have to drive families from place to place.

US automakers are beginning to stand a little more firm against Obama and his crew. A couple of years ago, when the auto industry was in serious danger of faltering, Obama was able to get increased mpg concessions (35 mpg by 2016) from the “Big 3” (actually, Ford wasn’t on board since they didn’t need the bailouts) as part of the bailout deals. Now that the industry is on a little firmer footing, they are pushing back a little.

Lobbyists are in full swing. Auto companies are seeking a standard at the lower end of the range by the government, citing studies that say meeting stiffer regulation would add thousands of dollars to the cost of a new vehicle and require a significant downsizing of vehicles in all classes. They also want certainly that there will be a single national standard and that California will not be permitted to pursue a tougher standard.

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Companies could receive credit for using low-polluting air-conditioner refrigerants, building cars that can run mainly on biofuels, putting solar panels to provide cooling powers and other gimmicks. (Source: Seattle Times)

Just so you are aware, that while the links provided will take you to the Seattle Times web page, the linked story actually originated at the ultra-liberal NY Times.  I point this out because there are a few turns of phrases that caught my eye. Things like “other gimmicks” and “Lobbyist in full swing” were purposely put in this story by a writer that I would be willing to bet fully supports these job killing and possibly industry killing mandates.

Subaru Succeds Without the Unions

Great post over at Director Blue on how to keep the unions at bay. Subaru is an uncommon success story in the American automotive industry. And they did it all without the union’s “help”.