Growls

Last Thursday, June 22, we growled about the high cost of government regulation. Specifically, we noted that in mandating higher CAFÉ mileage standards, the U.S. Senate was effectively increasing the number of Americans who would die as a result because to achieve higher mileage, the auto industry would have to reduce the weight of the vehicles, and noted the direct correlation of fatalities and lighter vehicles.

Charles Krauthammer’s column in today’s Washington Post explains how mandating the higher standard is effectively a free lunch for the Congress:

“(I)t is hard to conceive of a more politically dishonest and economically inefficient way to do it than with mandates that make private industry do Congress's dirty work, hide the true cost of energy efficiency and perpetuate the fantasy of the tax-free lunch.”

Actually, Krauthammer argues for the need to look at tradeoffs. In addition to the safety issue, there are the issues of cost, car prices, and the risk of driving Detroit into insolvency – all involving the matter tradeoffs. He explains:

“This country desperately needs better gas mileage. But it does not come free. The most efficient and equitable way to both increase mileage and reduce gasoline use (increased mileage alone can induce people, perversely, to drive more) is with a new gasoline tax, refunded by means of reduced payroll taxes to make it revenue neutral. But there is absolutely no congressional or administration support for that, because it is too honest and open an acknowledgment that there is no free lunch. The reason Congress loves corporate average fuel economy (CAFE) standards is precisely that they hide the cost -- in the sticker price of a new car. Whatever blame there is for the unfairness of life -- that energy efficiency is not free -- goes to the auto company rather than the mandating body, namely Congress.”

As noted economist Thomas Sowell has said, “There are no solutions...there are only trade-offs.” If only the political elite had such wisdom!