A Flat Tire for Low-Income Drivers?
Will the President raise taxes on new tires?
President Obama will need to decide any day now whether to impose tariffs on lower-end automobile tires imported from China. As my colleague Dan Ikenson has ably argued, the decision will tell us much about whether the president believes trade policy should serve the general interest of all Americans, or whether it is simply a political tool to satisfy key constituencies.
Neglected in the news coverage of the pending decision is the impact it could have on consumers. The imported tires targeted by this Section 421 case are of the cheaper variety, the kind that low-income Americans would buy to keep their cars on the road during a recession. If the president decides to impose tariffs, his union supporters will cheer, but “working families’ will find it more difficult to keep their cars running safely.
A central theme of my new Cato book, Mad about Trade: Why Main Street America Should Embrace Globalization, is that import competition is a working family’s best friend, especially imports from China. As I write in an excerpt published in today’s Washington Examiner,
Imports from China have delivered lower prices on goods that matter most to the poor, helping to offset other forces in our economy that tend to widen income inequality. …
Imposing steep tariffs on imports from China would, of course, hurt producers and workers in China, but it would also punish millions of American consumers through higher prices for shoes, clothing, toys, sporting goods, bicycles, TVs, radios, stereos, and personal and laptop computers.
We will see shortly if President Obama will punish low-income Americans who drive.
Cash for Clunkers Lesson: How to Use the $$ to Buy a Gas Guzzler
My son’s station car is an old Ford Explorer AWD which, despite being a V-6, was rated at about 15 mpg. Approaching 100,000 miles, the SUV’ s resale value is very low.
The House approved a bill to give him a $3,500 voucher to buy a car that is supposed to get only 18 mpg, or $4,500 if it gets 20 mpg. Only 18-20 mpg? That’s not moving us much closer to President Obama’s pie-in-the-sky 35.5 mpg goalpost is it?
Consider how easy it would be to game this giveaway program by using that $4,500 voucher to buy a big SUV or V-8 muscle car.
First of all, with Chrysler and GM dealerships folding, it should be easy to buy a mediocre Chevy Cobalt or Dodge Caliber for about $10,000 more than the voucher.
What you do next is sell that boring econobox, even if you end up with $1,000 less than you paid — that still leaves you with $3,500 of free money, courtesy of taxpayers.
As this process unfolds, the flood of resold small cars will make it even harder for GM, Chrysler and Ford dealers to get a decent price for small cars, because of added competition from new cars being resold as used.
That’s their problem, not yours.
So, take the $9,000 net from reselling the crummy little car plus the $4,500 from Uncle Sam. Then use that $13,500 to make a big down payment on a used Cadillac Escalade, Toyota Tundra pickup or Corvette.
File this under “unintended consequences” (my own file is running out of space).
Filed under: Energy and Environment; Government and Politics; Regulatory Studies; Tax and Budget Policy
P.J. O’Rourke, Driving Like Crazy
What do automobiles and American founding principles have in common?
At a Cato forum Tuesday, P.J. O’Rourke, author of the new book Driving Like Crazy, said well, plenty.
“Cars fulfilled the Americans’ founding fathers’ dream and ideal,” said O’Rourke. “Of all the truths that we hold to be self evident, of all the unalienable rights with which we are endowed, what is the most important to the American dream? It is right there, front and center…freedom to leave…freedom to get the hell out of town.”
Indeed, the American automobile as many have known it is fading fast. After years of government incentives to build certain types of cars, tax credits to buy smaller ones, higher gasoline tax proposals, and the government takeover of General Motors, the cars that so represented American freedom and individualism won’t last long, he said.
“Pity the poor American car when Congress and the White House get through with it,” he said. “A light-weight vehicle with a small carbon footprint using alternative energy and renewable resources to operate in a sustainable way– When I was a kid, we called it a Schwinn.”
O’Rourke said that going after the automobile is just a way for bureaucrats in Washington to take control over another part of Americans’ lives.
“I’m old enough to realize that freedom is always under attack,” he said. “This is a never ending struggle.”
You can watch his entire speech, or listen in on a Cato special podcast below.
Photo credit: Kelly Anne Creazzo
Which Is Greener?
Which uses less energy and emits less pollution: a train, a bus, or a car? Advocates of rail transportation rely on the public’s willingness to take for granted the assumption that trains — whether light rail, subways, or high-speed intercity rail — are the most energy-efficient and cleanest forms of transportation. But there is plenty of evidence that this is far from true.
Rail advocates often reason like this: the average car has 1.1 people in it. Compare the BTUs or carbon emissions per passenger mile with those from a full train, and the train wins hands down.
The problem with such hypothetical examples is that the numbers are always wrong. As a recent study from the University of California (Davis) notes, the load factors are critical.
Selflessly Giving…to Themselves
I wasn’t going to write about this because it is purely anecdotal, but Chris Edwards’ post on the generous compensation of federal employees, and the constant denial of that generosity by those employees’ representatives, inspired me to ingore my reservations.
A couple of days ago, I was driving through the streets of D.C. and ended up behind what appeared to be a new, black Jaguar. Now, trailing a Jag wasn’t all that extraordinary — D.C. is home to a lot of fancy cars. What was extraordinary was the wholly inconsistent declaration printed on the frame of the status symbol’s license plate: “Proud to be a social worker.”
It seemed wholly inconsistent, I should say, except, again, fancy automobiles are common on the streets of D.C., even though the District is supposed to be a city populated with “public servants.” So this public-serving D.C. driver was perhaps out of the ordinary for his implied candor, but is no doubt far from alone in serving himself at least as much as he’s serving others.
Of course, systemic evidence like Chris presents on federal workers, or I present on teacher compensation, indicates much more conclusively than my automotive observations that public-service-as-a-synonym-for-sacrifice is largely a political myth, a narrative repeated by public employees to win your sympathy while they grab for your wallet. Which is not to say that social workers, teachers, federal bureaucrats, etc., aren’t motivated to help others – no doubt many are – but like all of us, they’re also highly motivated to help themselves. And since their compensation comes through politics, it is making the public believe that they live tough, self-sacrificial lives that is, ironically, the key to their living the Good Life.
Filed under: Education and Child Policy; Tax and Budget Policy
The President’s New Cars
I had an op-ed yesterday in USA Today about President Obama’s proposed new fuel-economy standards. Don’t like ‘em. Unfortunately, an editing snafu over at the newspaper inadvertently left out the fact that there are four models at present that meet the proposed new standard — the 2010 Honda Insight (41 mpg) and the 2010 Ford Fusion Hybrid (39 mpg) were left off the list.
Space prohibited me from making an additional point. Even if there is no rebound effect, my colleague Pat Michaels finds that global temperatures will only be reduced by 0.005 degrees Celsius by 2050 and 0.0078 degrees Celsius by 2100 once you plug those emissions reductions into the computer models used by the IPCC. Of course, proponents contend that U.S. action on fuel efficiency will lead to like action abroad. Well, good luck with that. But even if all of the signatories to the Kyoto Protocol adopted Obama’s proposed fuel-economy standards, global temperatures would be reduced by only 0.038 degrees Celsius by 2050 and 0.071 degrees Celsius by 2100. If you tried to monetarize those benefits, you would be hard pressed to come up with an defensible number of consequence.
So what should be done instead? Nothing. At the risk of sounding politically irrelevant, there is no good case for the government to reduce U.S. gasoline consumption via fuel economy standards or fuel taxes; an argument I made at length in a study I co-authored almost two years ago with my colleague Peter Van Doren.
[Cross-posted at The Corner]
Obama’s Fuel-Economy Standards
If you like driving a big car or SUV, the good news about Obama’s new fuel-economy standards is that they won’t dictate what kind of car you will be able to buy in the future. If you want to buy a 15-mpg SUV, Detroit (or Aichi or Wolfsburg) will be free to make and sell you one.
The bad news is that the standards may make your car more expensive. Corporate Average Fuel Economy (CAFE) standards are actually calculated as the mean of gallons per mile, not miles per gallon. So, as of 2016, for every 15-mpg model made by an auto maker, that company will have to make five models of cars that can go 50 mpg in order for its fleet to meet Obama’s new target. Since bringing each new model to market can cost billions of dollars, if there are not enough people who want to buy those fuel-efficient cars to cover their design costs, the company will have to add a share of those costs to your SUV.
Simultaneously Destroying and Subsidizing the Auto Industry
The Obama Administration has announced new fuel-economy regulations and emissions rules that will boost the cost of new car by at least $1300. This is probably another nail in the coffin of the American automobile industry, but Jerry Taylor is the guy to provide thoughtful analysis. When I read about the new White House scheme, the first thing that came to my mind was this extremely clever video (yes, I am envious that my videos are not this creative) about the type of car we will all be driving if politicians continue to run amok:
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