Gas Taxes (again), or WSJ duplicity

This is fairly typical of the duplicty in WSJ editorials. They denounce the Democratic leadership for not calling for a large gas tax. But apparently Republicans get a pass, even though they were the leadership before 2006 for many years (12, was it?). They also don’t really endorse the gas tax, they merely assert (correctly) that higher priced fuel would lessen demand — so they can have it both ways it seems.

They also can’t keep themselves from propagating the myth that SUVs are somehow safer. SUVs are no safer than mid-sized cars, accdording to NHTSA data. These cars weigh over 1,000 pounds less — and, as would be expected, use commensurately less fuel. This is due to the unfortunate tendency of SUVs to kill their own occupants at a relatively high rate. SUVs also have the unfortunate tendency to kill occupants of other vehicles which weigh less at high rates — but this gets counted statistically against the other vehicles.

Also mentioned is the long-standing 25% tariff the US applies against any imported (light? any? pickups only?) trucks (a.k.a. the chicken tax). You would think that such a bastion of free-market thinking would at least mention that a tariff is a bad idea. But no. See High and Mighty: The Dangerous Rise of the Suv, by Keith Bradsher for more about the tariff.

That all being as it may, they say things that are fundamentally correct; that CAFE is a bad way to approach the problem of trying to curb fuel consumption.


The Drive-a-Toyota ActWall Street Journal, Editorial. July 2, 2007The next time Democratic leaders lament the decline of American industry, please refer them to the current Congressional brawl over auto fuel-efficiency standards. Nancy Pelosi, Harry Reid and most of their colleagues are siding with upscale environmental lobbies over American carmakers and workers. Call it their Drive-a-Toyota Act.Foreign automakers were cheering in June when Senate Democrats muscled through energy legislation to raise Corporate Average Fuel Economy (CAFE) standards, requiring that automaker fleets hit an average of 35 miles per gallon by 2020 (up from today’s 27.5 mpg). GM, Ford and Chrysler all warned Congress that this would add to their financial burdens, making their vehicles even less competitive with those made by Honda and other automakers. The United Auto Workers warned that even a small mileage increase could cost more than 65,000 jobs.Yet Senate Majority Leader Reid’s response was to scold Detroit for opposing him, and to assert that if the U.S. carmakers had only signed onto CAFE sooner they wouldn’t be in their current predicament. Had they “joined us instead of fighting us these last 20 years [over CAFE standards], they might not be in the financial mess they’re in today,” he said. His apparent point is that if only GM and Ford had invested in new technology and smaller cars the way Toyota and Honda have, they wouldn’t be losing market share. This is a bizarre reading of recent automobile history.Detroit has made its share of mistakes, but refusing to compete with smaller, more fuel-efficient cars isn’t one of them. GM tried and failed with its Saturn project. And one reason for that failure is that the main competitive reality facing Detroit for a generation has been the burden of its worker pension and health care costs. The consensus is that those costs add about $1,500 per vehicle compared to Japanese or Korean competitors. The best way to recoup those costs is by making larger vehicles that earn more profit per sale than smaller cars do. Making trucks (protected by a 25% U.S. tariff) and SUVs was entirely rational, and failing to do so would have meant more financial trouble earlier.

Mr. Reid also forgets that, until this decade’s surging gasoline prices, those larger, U.S.-made cars were what Americans wanted to buy. The Ford Explorer SUV was a huge consumer hit. With gas prices as low as 90 cents a gallon during the 1990s, U.S. drivers preferred the safety and power of SUVs [implying that suvs and especially pickups are particularly safe is simply untrue], pickups and large sedans. We don’t recall Bill Clinton proposing a 50-cent-a-gallon gas tax to spur gas conservation, or for that matter lecturing Detroit to stop making those vehicles.

Amid today’s much higher gas prices, more Americans are choosing more fuel-efficient cars — a market phenomenon that will do far more to reduce fuel consumption than any Washington mandate. As most economists understand, mileage mandates are an inefficient way to limit fuel use. They don’t reduce the number of cars on the road, and owning a car that gets more miles to the gallon often encourages people to drive more miles.

If Mr. Reid truly cared about cutting gas consumption, he and his party would increase the gas tax. But voters are already steamed about $3-a-gallon gas, and Mr. Reid’s commitment to lower carbon consumption doesn’t go as far as the personal sacrifice of losing Democratic Senate seats.

CAFE is a way to appease the green lobby immediately, while taxing Detroit, its workers and American consumers indirectly but significantly over time. Technology exists to further increase fuel efficiency, but that technology costs money. The Big Three will have to pass those costs along to consumers, which will make their products less competitive, while yielding a smaller profit margin on those they do sell. Ford lost $12.7 billion last year as it is.

One Democrat who understands all this is Michigan’s John Dingell, the House Energy and Commerce Chairman who has so far refused to include sweeping new fuel-efficiency standards in his energy bill. He prefers the more modest, flexible standards favored by the Bush Administration and U.S. carmakers. Ms. Pelosi has refused to budge from her plan to pass standards like the Senate’s, however. And so the House CAFE showdown has been postponed until the fall — or until enough Democrats and wealthy Sierra Club donors can beat Mr. Dingell into submission.

Journalists and greens are starting to highlight this debate as a test of Ms. Pelosi’s political manhood, saying she needs to show the venerable Mr. Dingell who’s boss. But it’s more accurate to say this debate is a test of who has more clout in today’s Democratic Congress — the men and women who work in American factories, or the affluent greens on both coasts who can afford to pay a premium to own a Prius to indulge their concern about global warming.

(See related letter: “Letters to the Editor: Gasoline Tax Reflecting Our National Concerns” — WSJ July 3, 2007)