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  • Obama Running Not One Auto Company but All of Them

    When President Obama bailed out General Motors, he stressed that he had “no intention” of running the auto company. Now he’s intent on running all of them.

    The Obama Administration tomorrow will announce new auto efficiency regulations that will create stricter miles per gallon (mpg) standards for cars and light-duty trucks for the model years 2017–2025. The target would be an average of 54.5 mpg by 2025 standard, slightly down from the initial proposal of 56.2 mpg. White House press secretary Jay Carney said the new regulations will “result in significant cost savings for consumers at the pump, dramatically reduce oil consumption, cut pollution and create jobs.” As nice as all that sounds, this is bad news for the American consumer.

    We are fortunate to have President Obama and his expertise in the auto industry looking out for the consumers and saving us money. But will consumers actually save money? It depends on whom you talk to. The government acknowledges that increased fuel efficiency standards will increase the upfront cost of a vehicle but that higher prices will be offset by savings on gasoline. Generally, these cost savings assume that the buyer keeps the vehicle for its entire lifespan, which usually doesn’t happen, and it also assumes the government’s increased price tag is accurate. Automotive systems engineers argue that it’s not—it’s much higher.

    Higher prices reduce demand and force people to hold onto their older vehicles longer. Reduced demand means fewer cars produced, which means automakers have to shed jobs. The Michigan-based consulting firm Defour Group projected that a 56 mpg standard would destroy 220,000 jobs.

    When it comes to greenhouse gas emissions, The Atlantic’s Megan McArdle notes that fuel efficiency standards will reduce carbon dioxide emissions, “but not by as much as advertised, because more fuel efficient cars make driving cheaper, so people will do more of it. This ‘rebound’ effect robs about 25% of gains, and also means more congestion, and more wear-and-tear on roads.” The rebound effect also takes away some of the estimated cost savings and oil reduction.

    It’s important to note that not all vehicle efficiency standards are the same, so trucks and sport utility vehicles will have easier targets to meet. The Detroit News obtained information that in 2017 light duty truck fuel efficiency will increase 1.7 percent, and passenger car fuel efficiency will increase 5.2 percent. The paper also said that “foreign automakers have said privately the plan could have the effect of pushing them into building more trucks—because it would be easier to meet the new requirements—than building more passenger cars.”

    At the heart of the issue is consumer choice. Consumers have plenty of vehicles to choose from, including over 160 different models today that get better than 30 mpg. The problem is not the lack of availability but the lack of consumer demand. Only 4 percent of car buyers bought cars getting 30 mpg or better in 2010. While it’s difficult to predict how consumers will react to the regulations, the fact is that consumers have largely demanded bigger automobiles. Toward the end of 2010, even with high gas prices, Chrysler’s sales were boosted by trucks and SUVs.

    As my colleague David Kreutzer writes when it comes to energy efficiency, “The implication here is that consumers and producers are unwilling to save money. A more likely explanation is that those contending that markets do not take full advantage of efficiency have themselves ignored other factors that should be included.” Consumers have different preferences and different needs and take a number of variables into account when buying a car, fuel efficiency being an important one. The market—not the government—knows how to take all these variables into account to meet consumer demand.

    President Obama doesn’t own all the blame for fuel efficiency standards. They date back to the 1970s. But they were a bad idea then and are a bad idea now.


    Posted in Economics [slideshow_deploy]

    16 Responses to Obama Running Not One Auto Company but All of Them

    1. Pingback: EPA Fuel Efficiency Standards Cost Jobs, Money and Lives

    2. Dean says:

      I would like to by a car that gets 30 mpg, but with 3 kids and a wife I can't afford to buy one with a $11 hour full time job and a $7.80 hour part time job.

    3. Pingback: PA Pundits - International

    4. Lloyd Scallan says:

      Is anyone wondering why now, in the middle of this life and death struggle to save this nation's economical system, does Obama come out with "mpg standards"? It's the same ploy over and over again. When Obama or his lackeys cannot answer questions, they use the same well-worned diversions and deceptions. Watch any leftist on any tv show. When they don't have an answer, (which is most of the time) they divert or change the focus. These people have been using the same tactic for generation. It's about time we recognize why they do what they do.

    5. Cindi says:

      Our #1 priority in buying a new car is safety. It doesn't matter how great your MPG is if you are RIP. To reach their goals cars will have to be produced that are lighter and sacrifice our safety.

    6. Micheal says:

      Looking for a reason to dismantle the EPA doesn't get any better than this. The EPA, and the multinational environmental groups aren't the least interested in the environment, but are instead pursuing a plan for a world-wide socialist state. Period.

    7. Bobbie says:

      these regulations are not the role of government! where is THEIR LINE DRAWN???? Every day the sun rises the people of America are being attacked by the American government! Get them out of our personal lives where freedom, choices and businesses exist!!!!! There is no purpose for their ongoing impositions and the less of them, the more money of our own!

    8. Pingback: Obama Running Not One Auto Company But All Of Them

    9. TimAz1 says:

      So what your saying is that trucks will continue to increase their market share of the Auto industry. I see nothing wrong with that. This will also expand the market for replacement parts for older vehicles, possibly increasing the demand for classic cars. I see nothing wrong with that either. No matter the dictates of govt. the consumer will always have the final say as to what they will spend their money on. As long as the govt. is unable to successfully destroy private wealth. The citizenry still has a chance to confine and control this necessary evil we call government. Had enough yet?

    10. TimAz1 says:

      In other words the demand for trucks will continue to increase in the auto market. I see nothing wrong with that. The market for replacement auto parts will increase as well. I see nothing wrong with that. The desire for classic cars will also increase. I see nothing wrong with that either. So long as govt. is unsuccessful at destroying the private wealth of the American citizenry. The citizenry will decide what they choose to drive as long as they have the money to do so. This also indicates that the citizenry still has a chance to confine and control that necessary evil we call Government. Had enough yet?

    11. Mike, Wichita Falls says:

      So when the union-dominated auto industry sheds an estimated 220,000 jobs due to stricter CAFE standards, will they get another taxpayer bailout, or will Congress pass another law in the spirit of Obamacare and "interstate commerce" to mandate our purchase of fuel-efficient cars?

    12. Rod Davidson says:

      Don't forget the impact to gasoline taxes with the higher mpg. Here in Washington State, the liberals are whining that gas tax receipts are down due to better mileage vehicles and less driving overall, so they are thinking of other ways to raise the money (such as tolls). Obama and the other democrats will do the same thing in spades when they get the chance.

    13. Cyrus says:

      Of course even with higher CAFE standards and gas mileage rates gas prices will continue to spike. I remember reading a story a few months back on Yahoo about NYC water rates going up despite water efficient stuff being mandatory now. Weird, huh?

      • jericho says:

        Who is this guy that is running this country????? OBAMA
        No birth certificate one he presented is FAKE.
        No collage records.
        No marriage records of his Marriage to Michell.
        No records of his existence until he run for OFFICE in Illinois
        We the people know more about George Saros than we know about him.
        who is this person????????????????

    14. Bill says:

      We can expect gas taxes based on miles driven rather than fuel used. We can also expect higher gasoline prices as Secretary Chu wants. We can therefore expect absolutely no savings in gasoline costs, more expensive cars, increased deaths per mile (since they will by necessity have to weigh less–you can't change laws of physics with technology), no change in "greenhouse gases" (if you believe in that nonsense) since people will drive more, and the loss of jobs not only in the automobile industry but all ancillary industries. So what exactly is being accomplished? The environmentalists are trying to destroy the fossil fuel industry, little by little, and really don't care about anything else.

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