According to travel agency AAA, approximately 32.1 million Americans journeyed in a motor vehicle during the Memorial Day weekend. That’s a 1.8 percent increase over last year’s mark (thanks to a growing economy fueled by the Bush tax cuts). But someone needs to remind California Republican Gov. Arnold Schwarzenegger and Democratic Sen. Barack Obama that these motorists were traveling in vehicles of their own choosing.
Schwarzenegger is no longer an actor, and Obama doesn’t practice law anymore. In fulfilling the duties of elected office, each has foregone his prior calling. But it may come as a surprise to American motorists that these two men are moonlighting as engineers, fresh off the shop floor. In fact, each of these politicians purports to know more about motor-vehicle production than the domestic automakers do.
Back in April, Schwarzenegger — who is known for tooling around the Golden State in his oversized Hummer — told Detroit to “get off your butt” and produce more environmentally friendly vehicles. On May 7, after Obama drove up to the Detroit Economic Club in a full-size sport utility vehicle, he instructed automakers to increase fuel economy.
Neither has gone as far as Al Gore, who proposed eliminating the internal combustion engine over a twenty-five-year period in his 1992 book, Earth in the Balance. But in typical elite fashion, Obama and Schwarzenegger are delivering a clear, and hypocritical, message: Build as we say, not as we drive. Specifically, they want Detroit to manufacture politically correct small vehicles or face increased government regulation.
Corporate Average Fuel Economy (CAFE) standards, which date to the 1973-74 Arab oil embargo, represent costly government mandates for this nation’s automakers. For example, the current passenger-car standard of 27.5 miles per gallon poses “very significant challenges” for manufacturers, as explained in Ford Motor Company’s most recent annual report:
Ford’s ability to comply with CAFE or greenhouse gas emissions standards depends heavily on the alignment of these standards with actual consumer demand, as well as adequate lead time to make the necessary product changes (assuming that the technology can be developed). If consumers demand vehicles that are relatively large, have high performance, and/or are feature-laden, while regulatory standards are skewed toward vehicles that are smaller and more economical, compliance becomes problematic. Moreover, if regulatory requirements call for rapid, substantial increases in fleet average fuel economy (or decreases in fleet average greenhouse gas emissions), we may not have adequate resources and time to make major product changes across most or all of our vehicle fleet (assuming the technology can be developed).
Translation: The government’s insistence on smaller motor vehicles — at great cost to manufacturers — can conflict with consumer demand for larger vehicles. Are manufacturers, and their workers, in business to serve government, or their shareholders and consumers? Schwarzenegger and Obama seem to be saying: “Government.”
One-million Americans are employed in the production of motor vehicles and parts, according to the U.S. Bureau of Labor Statistics. Increased regulation, including higher CAFE standards — which General Motors now estimates could add between $5,000 and $6,000 to the cost of each vehicle produced — are among the many factors contributing to the postwar decline in automotive jobs, which peaked in the late 1970s.
And yet, despite the clear negative effects of Washington’s micromanagement of the auto industry, politicians like Obama and Schwarzenegger support higher CAFE standards. This position might play well with some environmentalists, but it’s nothing but a job killer — and, potentially, a poverty creator.
Oregon’s Cascade Policy Institute, for example, contends that motor-vehicle ownership actually plays a role in reducing poverty, since it provides a link to both employment and self-sufficiency. Portland State University researcher Kerri Sullivan, in a report for the National Center for the Study of Adult Learning and Literacy, points to studies claiming that “not having a car can pose a barrier for job seekers — for some positions, applicants without a car are not even considered.”
Ultimately, the issue of fuel economy should revolve around consumer preferences, not government mandates. For instance, in the process of meeting demand, car makers already produce the smaller, fuel-efficient vehicles that some of us drive, while also building the large SUVs that transport so many Americans — including a good many of our politicians. If CAFE standards already suggest that American motorists are not smart enough to make these choices, what do increased standards say? Politicians who ignore the market forget that it is already responsive to consumers. Car companies that fail to meet consumer preferences will eventually go the way of Studebaker, Hudson, and Packard.
Tens of millions of Americans own motor vehicles. And these consumers don’t need government to tell them which cars they ought to drive. Motorists — and investors – must decide which models sell and which automakers stay in business. Not Washington or Sacramento.