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We'd all benefit from higher gas prices

Virginia McConnell

TEXT OF STORY

TESS VIGELAND: Lots of talk, no action again today on a bailout package for U.S. automakers. President Bush warned that bankruptcy for any of the Big Three would be devastating for the economy.
But Treasury Department officials said they had no timetable for a decision on rescue monies.

Meanwhile, the debate rages on over how Detroit got itself to this point. They didn't innovate fast enough.
They didn't stay competitive. Foreign auto companies led the way with fuel efficiency.

Commentator Virginia McConnell says there's plenty of blame to go around, and we should start by looking in the mirror.


VIRGINIA MCCONNELL: Detroit has been very good at producing vehicles Americans want to buy. Over the past 15 years the Big Three had record sales of trucks, vans and SUVs -- including the two largest sellers in the U.S. In a world of low gasoline prices and rising incomes, this was a business model that made sense.

Yes, auto companies resisted early regulations, but in the end they complied. Today's vehicles are enormously cleaner, more fuel efficient, and have much more power than their counterparts of 30 years ago.

Yet, in spite of these achievements, there's still a fleet of large, gas-guzzling vehicles on America's roads.

Why? In part because of the low price of gas in the U.S. over the past 20 years. Congress had the opportunity to gradually raise federal gas taxes to reflect the environmental and political costs of driving, but they did not.

The last tax increase, all of 4 cents a gallon, was in 1993. So our federal taxes on gasoline remain the lowest in the developed world, resulting in gas prices that are less than one-fourth those in both Europe and Japan. No wonder these countries have been able to engineer smaller, better, fuel-efficient vehicles.

Now we are at a crossroads. Companies that survive this economic downturn must continue the transition toward greener vehicles. But this transition will be neither quick nor cheap. Recently passed fuel economy standards are a step in the right direction, but high gas prices are essential. They provide incentives to manufacturers to produce the new generation of vehicles, and for consumers to buy them. The recent run-up in oil prices showed us what a powerful force the market can be in influencing purchase decisions and spurring innovation. Now, with gasoline back to $1.50 a gallon, sales of hybrid vehicles are faltering.

So, let's stop expecting the car companies to protect us from ourselves. If we want less dependency on foreign oil and reduced greenhouse gases, we'll have to put policies in place to achieve this. If we do, the automakers, whichever ones remain, will figure out how to get us there.

VIGELAND: Virginia McConnell is a senior fellow at Resources for the Future, a think tank in Washington D.C.

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Whether the gas tax is 18 cents or 58 cents we are still getting taxed to the same amount to build and repair roads and bridge(you know the ones we always complain about being in terrible condition). Since the 18 cents can't cover the cost of maintaining the roads the government just takes it from somewhere else(social security?). I hate taxes and spending more than most people, mainly because we have no idea where the money ends up going. If the DOT became a self funded entity based on gas taxes, it would be more like a user fee (but not quite as arbitrary as a toll road). Increasing the tax now(1980 would have been better) and maybe in twelve months we would be complaining about 4 dollar gas again and expecting the government to do something about it.

It is true consumers have much to blame themselves for regarding the auto crisis. It is also true there is probably more blame than can be distributed in a radio commentary. Ms. McConnell, however, might have at least acknowledged that while consumers are ultimately responsible for their purchases, American car manufacturers influence consumer thinking through political donations, lobbying bills and, as any soft-drink manufacturer knows, image branding. Ford showed how this might be done marketing its hybrid line.

It's a great pity climate change requires a response sooner than market shifts allow, even assuming vehicles with a seven year life expectancy and a knowledgeable consumer base. Ms. McConnell risks showing political naiveté by not mentioning the tacit influences on the consumer and the resulting responsibilities of large industries.

It is true consumers have much to blame themselves for regarding the auto crisis. It is also true there is probably more blame than can be distributed in a radio commentary. Ms. McConnell, however, might have at least acknowledged that while consumers are ultimately responsible for their purchases, American car manufacturers influence consumer thinking through political donations, lobbying bills and, as any soft-drink manufacturer knows, image branding. Ford showed how this might be done marketing its hybrid line.

It's a great pity climate change requires a response sooner than market shifts allow, even assuming vehicles with a seven year life expectancy and a knowledgeable consumer base. Ms. McConnell risks showing political naiveté by not mentioning the tacit influences on the consumer and the resulting responsibilities of large industries.

Ms McConnell suggests that smaller cars are the rule in Europe and Japan because their gas taxes are higher than ours. No mention, of course, of the role played by the cramped streets that predominate in the cities of Continental Europe and Japan where bigger vehicles are so inconvenient as to be a nuisance to their own drivers. Just another example of how zealous believers in whatever cause selectively deliver facts carefully designed to paint their desired picture. McConnell believes --- and wants all of us to believe --- that government intervention is the panacea for all our ills. Environmental central planning is the new mantra, and many people who are otherwise sensible about the workings of the free market succumb to the familiar arguments for government action because they are now tinted green instead of red. Shame on McConnell for working so tirelessly to restrict trade, economic development and technological progress, because those are the only valid means to address her complaints:
"[A]uthoritarian command and control measures are NOT necessary to advancement of ecological ends. Quite the reverse. It is economic liberty that is essential, because . . . voluntary exchange, voluntary agreement and private iniative provides the most effective possible framework for pursuit of these ends."

When I heard Tess Vigeland's introduction of this article, I was excited.

"Finally," I thought, "someone is going to put the responsibility for the environment where it belongs - on the consumers!"

But alas, I was sorely disappointed to hear Virginia McConnell's suggestion to increase taxes on gas in order to legislate environmental responsibility.

If Americans and other citizens of Earth want further advances in environmentally-friendly cars - then they have to show that decision through their purchases.

In short, Tess Vigeland's comment to "start looking in the mirror" is correct. Consumers need to voice their opinion through their purchases - not by legislating even more taxes that may have unintended consequences and
can harm consumers' daily lives and overall economic growth.

To encourage the development and production of environmentally-friendly cars - start buying environmentally-friendly cars or buy stock in companies developing the technologies that support them.

Following the basic rule of economics the proffered incentive of cash will cause a greater change than taxing ourselves further.

Detroit makes some horrible cars that need to be weeded from their lineups, but a broad accusation of "under-engineering" is ridiculous. A Porsche Cayman costs about $50K and puts out 245 HP/201 lb.-ft. A Chevy Cobalt SS costs $25K, yet makes 260HP/260 lb.-ft. A Chevy Corvette, at about $50K gets you 430/424.
I'm not debating Porsche vs. Chevy, because different consumers are after different things. But Detroit's problem is not a lack of engineering prowess.

Ms. McConnell makes some interesting points in her Dec 15 story arguing for higher gasoline prices. The flip side of this argument also bears some time. For the last 20 years (and more) the GDP of the U.S. have been significantly higher than that in Germany, France, Spain and the rest of Europe. Over that time period,the average American increased their standard of living much more than in Europe. So what would we rather have? Cooler temperatures or better houses, better education, better clothes, etc etc? By the way, it's 18oF right now and it's not ever Winter yet.

Let's not forget that most of Detroit's cars are under-engineered and downright homely. If it's going to handle like a truck, and get gas mileage like a truck, why not get a truck?
in contrast, European and Japanese carmakers have been building attractive, gas sipping, small to mid-sized cars for decades. Not only that, those vehicles from the over-seas competition were built to last. A ten year old Toyota holds it's value because at 100,000 miles it's barely broken in! My mid-80s Porsche has nearly 170,000 miles on it's odometer. It gets great mileage, is fun to drive and still turns heads...what else to you need from your commuter vehicle? These older cars are relatively inexpensive, and when properly maintained are far cheaper to keep than a new vehicle of any make. I like to think of it as recycling...and as many of the parts for those older cars (and trucks) are manufactured by workers, sold through parts dealers, and serviced by mechanics right here in the U S of A, their survival in ensured as well. There's more to faltering hybrid sales than lower gas prices. People are doing their homework and discovering there are plenty of great cars out there that make far more economical/environmental sense to buy and drive.
I'm not trying to imply that a used "classic" or "collectable" or "specialty" car is for everyone; just that they are an increasingly attractive alternative. I for one am keeping an eye on Porsche's latest releases...sometime in the next decade I may forsake my classic 911 for an '08 Cayman...or not.
;-)

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