Nov 182008
 

CAFE standards are an abomination. I’ve always known that. If we need to internalize the external costs of our fossil fuel addiction, the most direct, corruption-free way is the market-oriented approach: a fossil fuel tax or a carbon tax.

Leftists keep whining that they can’t get public support for such a thing. But they don’t try. They keep wanting to make it a net tax increase, which of course won’t fly. I wouldn’t be in favor of that, either.

But there could be countervailing cuts in other taxes. Consumption taxes are regressive, but a carbon tax could be balanced by a cut in one of our most regressive payroll taxes, the FICA tax, perhaps in combination with one of the few Obama proposals that I could get behind: abandoning the fiction that Social Security is a insurance system and taxing the wealthy in proportion to their income.

But back to CAFE. The kiddie leftists among us (some of them aged 50 and up) are wetting their pants in eager anticipation of re-regulation, as they call it. Well, let’s look at how their type of regulation works.

Holman Jenkins, Jr. at the WSJ explains. General Motors is going to be allowed to claim that the Chevy Volt is a 100 mpg car. It wasn’t Yankee ingenuity, sophisticated engineering, entrepreneurial energy, or environmental consciousness that produced a 100 mpg car. It was instead a matter of using political clout to lobby the regulators to rig the rules. The Big Three car makers have been given special political favors as far back as Carter and Reagan, and those companies are still better at manufacturing political influence than fine automobiles. By classifying the Volt as a 100mpg car and selling it at a loss, GM is going to be able to sell more gas hogs to other customers, on which it might make money.

But it won’t cure our addiction to oil.

So much for the age of re-regulation. Even if the EPA backs away from some of this attempt at manipulation this is not a process by which such decisions are going to be made on the basis of cost/benefit to the environment. This is a process by which decisions will be made on the basis of political clout.

P.S. I’ve learned over the years to value the WSJ’s reporting on such regulatory issues very highly, but to not trust it to always report everything that needs to be reported. So here’s a recent NY Times article on the subject, which contains additional information that shows how this corrupt regulatory system works.