Investor’s Business Daily posted an editorial today about President Trump’s visit to Detroit to talk to auto manufacturers. The editorial reminds us of some of the policies initiated by the American government that have created problems for the auto industry. The editorial also suggests some solutions for these problems.
First, the editorial examines the history of CAFE Standards:
For those who don’t know, the federal government first imposed the “Corporate Average Fuel Economy” standard in 1975, in response to the government-caused energy crisis. The standard requires automakers to meet annual fuel economy targets based on the fleet of cars they sell in a year, or pay stiff penalties.
By the time the standards started to bite in the early 1980s — which forced a radical (and deadly) downsizing of the domestic fleet of cars — President Reagan had deregulated the oil industry, thus ending the energy crisis. And now, with fracking, the country is awash in domestic oil supplies.
But the CAFE standards persisted, and President Obama hiked them in 2009 and again in 2011. If left in place, cars will have to get an average 54.5 mpg starting in 2025 — less than eight years from now.
This was a thinly disguised effort by the Obama administration to force electric cars onto the market, since not a single conventional vehicle comes close to that mileage standard today.
This is just another example of the government interfering with the free market to the detriment of the American consumer.
The Standards were supposed to be reviewed in 2017, but the government, under President Obama, reneged on its promise:
Detroit signed on to this idiocy in 2011 in part because it reformed the existing CAFE regulations, but mainly on the promise that they’d have the chance to review and amend the standards in 2017. But just before leaving office, Obama’s EPA regulators reneged on their end of the bargain, locking the 54.5 mpg mandate in place without even a cursory review.
In a recent letter to Pruitt, the Auto Alliance — which represents Ford (F), GM (GM), Fiat Chrysler (FCAU), Toyota, Volvo and other carmakers — pushed him to allow the 2017 review to go on as promised, so they at least can make their case on why the 2025 standard should be eased. Trump announced his plans to do so on Wednesday at an event in Detroit.
The Standards did encourage auto companies to design cars that got better gas mileage. However, now it is time to let consumers make their choices as to what cars and what efficiency they want. The CAFE Standards have raised the price of cars for everyone and not really accomplished much. It is time to encourage auto makers to make cars that get reasonable gas mileage, but not hold them to unreasonable standards. The CAFE Standards need to go.