Monday, May 08, 2006

"The U.S. Automaker Chapter 11 Promotion Act"

The Wall Street Journal's got a penetrating editorial on the push to raise CAFE standards in today's edition. Unfortunately, the newspaper's subscription firewall prevents posting the piece here. That said, the argument's important enough for me to just go ahead and key-in a few of the critical passages. As indicated in the editorial, the Bush administration is pushing Congress to raise Corporate Average Fuel Economy Standards (CAFE), which haven't been raised since the 1970s, and are set at 27.5 mpg per corporate fleet. WSJ says "This is where President Bush's new "addicted to oil" rhetoric is taking him and us -- namely, to the government further dictating the kind of cars Americans will be able to drive, even if those cars aren't as safe on the road." Apparently, the auto makers have been able to increase fleet fuel efficiency by lightening vehicles, which in practice has meant smaller and less safe cars on the road. Here's a longer passage:
It is undeniable that higher CAFE standards kill people: Larger, heavier cars have lower death rates in crashes. Because automakers have met CAFE standards largely by reducing automobile weight, traffic fatalities in smaller cars have increased. The National Academy of Sciences once focused on the impact of CAFE standards in a single year, 1993, and estimated that they resulted in as many as 2,600 additional deaths. Average car and light-truck weight rose a bit in the 1990s, and in 2002 the Academy wrote that this increase, "though detrimental to fuel economy," had "saved lives in return."
WSJ agues that this push to increase fuel standards across corporate fleets will hurt American auto giants Ford and GM, who make their profits off larger vehicles, and would therefore utlimately benefit smaller car makers, such as Honda and Toyota, who profit from their preponderance in the smaller car segments. Says the editorial: "Perhaps Congress should call this idea the U.S. Automaker Chapter 11 Promotion Act."

Here's another interesting passage, which suggests that the president and Congress should let markets work, rather than increasing regulatory inefficiencies:

As for saving gas, there's little evidence that CAFE standards matter all that much. Americans tend to drive more miles in high-mileage cars, and when gas prices are lower they shift to SUV's and other vehicles that give them space and a greater sense of security. The best gas-saving plan around is today's high prices.

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