I’m from the government and I’m here to help with a brilliant idea. Let’s force auto makers to cut the consumption of fuel by making paper-thin cars at a painful cost to consumers, thereby lowering the amount of gasoline consumed by motorists every year. At the same time, I have another brilliant idea to force oil refiners to blend insane amounts of less efficient ethanol into the nation’s gasoline supply. Oh, guess what: The first brilliant idea ensured that there wasn’t enough gasoline being consumed to meet the demands of the ethanol blend mandate. That, in a nutshell, is what our government has done since 2007.
Trump had an opportunity to roll back, in part, both of these swamp ideas, but it appears that the swamp is winning on both counts. Is it any wonder our economy is so inefficient that even with record job growth, GDP is growing by less than two percent?
In order to serve the gods of the climate and limit the use of fossil fuels, Congress dramatically expanded the Corporate Average Fuel Economy (CAFE) standards in 2007, forcing auto manufacturers to make expensive cars with paper-thin steel in order to comply with the green energy agenda and increase their mileage per gallon (mpg) from 27.5 to 35. This was part of Energy Independence and Security Act of 2007, the same bill that expanded the ethanol mandate, which would later run into problems with the CAFE standards. Just like with the ethanol mandate, the EPA has created trading credits where manufacturers can buy credits from competitors in exchange for not complying with the standard.
The average price of new cars rose another 3.9 percent in 2017 to $36,270. According to the Heritage Foundation, “a 1 mpg tightening of the standard would cost consumers $7.81 billion annually.” It was one of the lasting liberal legacies of the Bush administration.
Enter Obama, who went around Congress and in 2012 ostensibly raised the CAFE standard to over 54.5 mpg by 2025. The first phase of the plan was to increase the standard to 37 mpg, and the massive increases were slated to then begin with car models 2021 and onward. The Trump administration promised to roll back this costly regulation, and on August 2, 2018, the EPA and the U.S. Department of Transportation’s National Highway Traffic Safety Administration (NHTSA) released a new rule to countermand Obama’s policy — the Safer Affordable Fuel-Efficient Vehicles Rule for Model Years 2021-2026 Passenger Cars and Light Trucks (SAFE Vehicles Rule).
The purpose of SAFE was to freeze the current fuel standard of 37 miles per gallon and, according to the EPA, “to correct the national automobile fuel economy and greenhouse gas emissions standards to give the American people greater access to safer, more affordable vehicles that are cleaner for the environment.”
But the radical environmental groups, the state of California, and even some industry leaders who have created a business model around the new regulations (to screw competition and pass the buck down to consumers) fought it ferociously. California bullied automakers Ford, VW, Honda, and BMW into increasing fuel emissions and mileage standards by 3.7 percent annual efficiency gains in model years 2022–2026. They are aiming for a standard of 46.7 mpg. Last Thursday, the Trump administration announced that it would be scrapping SAFE and agree to gradually raise the CAFE standards again. Forbes is reporting that the Trump administration will announces a 1.5 percent increase in fuel efficiency and emissions reduction mandates. This would be a huge mistake.
The fight over CAFE standards, much like the fight over ethanol, demonstrates a problem free market conservatives and American consumers face when dealing with big government. Not only have the left-wing ideological groups taken a hatchet to consumers, but the industries have gone along with these costly schemes because they have found ways to co-opt the regulations and even box out competition and consolidate monopolies, while passing the cost down to American purchasers. We see this with ethanol, with the big oil industry supporting big ethanol against the smaller independent refiners because they can afford to purchase the trading credits.
There is a similar dynamic unfolding with the auto industry, but given that it is more diverse with more competitors, there are some auto makers who have dissented from the political class and have sided with Trump, such as GM, Fiat, Hyundai, Toyota, and Kia. Trump should continue fighting for them and the American consumer.
According to the Department of Transportation, the SAFE rule would result in the following benefits for consumers and manufacturers:
It makes no sense for the American people to be on the hook for such a human and fiscal cost of driving expensive paper-thin cars at a time when we are blowing out the global oil and natural gas markets with our production. CAFE standards were originally enacted during the oil crisis of the 1970s, when lawmakers were convinced we were running out of oil. No such emergency exists to justify drastic market intervention now.
Moreover, by inducing a reduction of oil consumption through expensive fuel-efficient cars, these same nanny-state liberals are exacerbating the other odious mandate from 2007 – ethanol. The parasitic biofuels industry has already successfully lobbied the administration to raise the target fuel blending to nearly 20 billion gallons of biofuels and is now trying to limit the hardship credits to independent refiners that are struggling from this statist mandate. But on top of all that, with CAFE standards reducing the demand for gasoline, the refining industry couldn’t even blend in that much ethanol if it wanted to!
With trillions of dollars of misallocated resources all to serve the gods of crony capitalism and ideological green-socialism, is it any wonder our economy is permanently languishing? Our economic system has likely changed our future forever. It’s been 14 years since we’ve achieved three percent annual GDP growth. Last quarter, the economy grew by just 1.9 percent at an annualized rate, even though the job market is better than it has ever been. What gives? Well, the debt is one culprit. But another is the venture socialism. Sure, we can create endless jobs in a boom period, but thanks to our inefficient market distortions, it’s not resulting in the growth we would have enjoyed during any other boom period since WWII because large sectors of our economy are built upon convoluted mandates and distortions that service ideology, not economic growth and consumer satisfaction.
If the president wants to harness true free market populism to achieve economic growth, promote liberty, and provide better products and cheaper prices for consumers, he should go to war with the corrupt alliance of green socialism and crony capitalism. It’s time to freeze both the ethanol and CAFE mandates, two baseless policies that harm everything, including each other’s own stated goals, except for the parasites getting rich off government socialism.
Daniel Horowitz is a senior editor of Conservative Review. Follow him on Twitter @RMConservative.