Planet Gore

D.C. in the Driver’s Seat

Detroit, Mich. – I wrote with my Detroit-based colleague, Shikha Dalmia of the Reason Foundation, for Saturday’s Wall Street Journal on how Washington’s Detroit bailout has created a powerful public-private lobby for a national industrial policy.

The scenario is playing out before our eyes this week.
Within hours of President Obama’s announcement that he would order the EPA to consider a federal waiver allowing California to set its own draconian fuel mileage rules, an unnamed source in the Obama White House told Detroit News reporter Dave Shepardson that “ ‘additional tools to support the auto industry will be considered’ in light of potential additional regulatory burdens.”
“Automakers face an uphill climb in convincing the Obama administration not to grant states the right to impose their own tailpipe emissions standards,” translated Shepardson, “but those tougher regulations could come with more federal loans.”
This wink from Obama instantly shut up the Detroit automakers, which declined comment on the California rules (rules that they have a lawsuit against!).
And instead of fighting the government, the companies went on the offensive against consumers. GM vice president Bob Lutz publicly advocated higher gas taxes–deeply unpopular with his own customers–because that is the only way Americans will buy the cars the government wants to mandate. “There needs to be an energy policy that puts the consumer into the equation and actually gets people to think about what kind of vehicle they should be buying the next time around,” Lutz said. “At a $1.50-a-gallon gasoline, nobody is going to buy all these necessarily, more expensive, high-technology vehicles.”
Meanwhile, Michigan has just passed $330 million in tax credits for battery plants built in-state. Democrats are jealous of the Japanese and Koreans who, they claim, have funded electrics as part of their own industrial policy. Not coincidentally, GM announced plans to build a $30 million battery production facility here, ALL of which, Michigan’s economic development agency confirms, can be paid for by the credit.
In announcing the credit, Michigan governor Granholm and GM both pointed to the Obama administration’s own contribution to this emerging electric industrial policy: $11 billion in electric infrastructure and $2 billion in loans to $2 billion in loans to build “advanced vehicles and battery systems.”
At a Detroit Auto Show press conference two weeks ago, the Competitive Enterprise Institute’s Sam Kazman spoke of the Washington-Detroit bailout, warning that “government money is followed by government strings which is followed by companies kowtowing to government to meet those strings.”
Truer words were never spoken.

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