Nancy Pelosi needs to get out of the way and let Barack Obama steer Democratic Party policy. She has been too visible and vocal of late, forgetting that her role as the most powerful Democrat is over. She is as lame a duck as George W. Bush, except that she doesn’t seem to know it. Her posturing during the automotive industry bail-out hearings has been particularly annoying. She no longer speaks for me; a card carrying Democrat, born in Baltimore, Maryland when her father, Thomas D’Alesandro Jr., was Mayor.
The automotive bail-out is not about Corporate Average Fuel Economy standards (CAFE), regardless of what Mrs. Pelosi and the Wall Street Journal say. Focusing on CAFE is like bringing the cultural wars to gasoline consumption [gasoline, by the way, is just refined prehistoric zooplankton, no constituency there]. Apparently, Mrs. Pelosi is really mad about Detroit being able to thwart higher CAFE during the Bush Administration, while the WSJ views CAFE standards as a UAW plot to keep out Chinese imports. Both political extremes are focusing on the wrong the issue. The auto industry is in trouble because gas prices have been fluctuating wildly and consumer credit has dried up.
Turning to the facts, for November, industry sales are down more than 30%; that signals consumer credit and confidence problems. To solve this short-term credit issue, Congress needs to free up financing by releasing some of the $25 billion already approved and earmarked for fuel efficient car projects. The car company need the money now, so that they will be around to develop the next generation of cars. The Republicans ain’t going to release the money from the $700 billion banking bail-out so it is time to get on with it, Mrs. Pelosi. No one cares that the money was earmarked for your pet project — funding the development of fuel efficient cars.
Moreover, developing fuel efficient cars will be a empty gesture if gas prices don’t incentivize consumers to want them. The only way to get consumers to pay the extra money for hybrids is to raise the price of gasoline.
Take a look at the November numbers from the perspective of fuel economy. Gas guzzling pickup truck sales — Ford F-150 and Chevrolet Silverado – are down 20% while the sales of gas sipping small cars like the Honda Civic are down 30%. Toyota sold 48% fewer Prius this November than last year. This clearly shows that gas prices have a major impact on purchase decisions. Now that gas prices have collapsed, pickup trucks are starting to sell again while hybrids are declining. So the solution to automotive industry woes is not in artificial CAFE standards that distort market demand, but in stabilizing and raising the price of gasoline. Without stable fuel prices, auto manufacturers cannot make informed investment decisions.
The solution to stable fuel prices is to put a tariff on imported crude oil and its derivatives. This tariff would target a price of $100 per barrel in seven years – 2016. By gradually increasing the price of imported crude, America can solve its major problem, energy dependence. The phase-in period would let consumers get value for their current gas guzzlers, give manufacturers time to convert their factories to more fuel efficient models, protect the collateral of automotive lenders and create the price environment in which alternative energy projects and oil and gas exploration can get financed.
The revenues raised by such a tariff can be used to pay down the national debt.
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