Obama sets bankrupt auto companies on war path with consumers

The new fuel mileage standards the Obama administration is proposing have set bankrupt Detroit car manufacturers on a war path with the consumers that they need to buy their product. Americans will not buy the expensive hybrid or electric cars that will be needed to meet these stringent new standards unless gas taxes are significantly raised or the government subsidizes every vehicle. The Wall Street Journal is reporting:

Start with technology. The President's proposed standards would raise fuel economy goals higher and faster than even the National Highway Transportation Safety Administration believes is practical. Last year, NHTSA issued a proposed rule making that would have raised fuel economy to 32.2 mpg by 2015 for cars and light trucks combined. Its 376-page report notes that "the resources used to meet overly stringent CAFE standards . . . would better be allocated to other uses such as technology research and development, or improvements in vehicle safety."

The new U.S. fleet will almost certainly be made up of hybrids and electric cars. This comports with the explicit intention of the President and his environmental partners to back out fossil fuels. One may ask: Once Detroit is forced to build these cars, will free Americans want to buy them, at any price?

Unless we outlaw the bigger cars that recent sales figures have shown Americans prefer any time gas prices fall below $4 per gallon, Detroit will need help marketing these small vehicles. As GM's Bob Lutz put it not long ago, "Very few people will want to change what has been their 'nationality given' right to drive big and bigger if the price of gas is $1.50 or $2 or even $2.50. Those prices will put the CAFE-mandated manufacturers at war with their customers."

All solutions to this problem flow from Washington. One would be to give substantial tax subsidies to buyers. Another would be to impose a federal gas tax to jack up the price of gasoline to $4 per gallon and keep it there. This is the solution that keeps Europeans driving small cars with tiny engines. High gasoline prices have become a political third rail in U.S. politics, and the Obama Administration insists it isn't interested in subsidies or taxes.

If Obama is somehow able to meet his mileage goals, there will not be enough money to repair the roads. Gas taxes pay for the bulk of road maintenance. If there is a 30% reduction in gas usage, the road maintenance costs will have to be funded by higher taxes somewhere. This will offset much of the gas cost savings officials are touting. Consumers will also be stuck with the $1300 hike in vehicle costs the new regulations will cause.