Consumers Put the Brakes on Obama’s Fuel Goals

NPR published an interesting story: “Is Obama’s Hope For Better Fuel Economy Sputtering Out?

The story begins by telling us that the automobile manufacturers are claiming that Obama’s bailout was a “success.”

There were high-fives this week from Detroit to Washington, D.C., as carmakers celebrated record auto sales.

Americans bought 17.5 million cars and trucks in 2015. That’s a huge turnaround from 2009, and the Obama administration cheered the rebound as vindication of the president’s decision to rescue General Motors and Chrysler from bankruptcy.

“Because of the policy decisions that were made by this administration to place a bet on those workers, America has won, and our economy has been better for it,” White House spokesman Josh Earnest told reporters Wednesday.

In other words, the companies know that they will be bailed out again when (not if) they fail. Americans are paying both in the showroom and through taxes.

Originally, the reports said taxpayers lost over ten billion dollars on the deal. But even that was an understatement. As Mark Horne wrote:

First of all, the $49.5-billion bailout was not a $10.5-billion loss “for taxpayers.” No, it was a $49.5-billion loss. None of that money helped taxpayers in general. It helped a specific company. Nor are taxpayers getting the money back. The $49.5 billion is not being returned to each taxpayer according to how much of it he or she paid in taxes.

The government gets to keep the money that it receives for the stock it sold. None of it goes to any taxpayer.

Furthermore, nothing in the bailout went to “support… the automobile industry.” The claim is bogus.

An industry is a kind of work or a kind or product, not a particular company. According to Dictionary.com:, “Industry” refers to “the aggregate of manufacturing or technically productive enterprises in a particular field, often named after its principal product: the automobile industry; the steel industry.”

By bailing out GM, the government undermined some people in that particular field of manufacturing and supported others. Specifically, it supported the management and the unions of GM and Chrysler even though they had led the company into insolvency, and they kept others from entering the field or, in the case of Ford, from massively expanding market share.

So instead of a fresh new start in the automotive industry, the Department of Treasury propped up bad leadership and snatched away opportunities from promising new leadership in the industry. They did this with multiple tens of billions of dollars robbed from taxpayers. But beyond what they robbed, the lost opportunities to get new and better automotive companies is incalculable.

But the delightful news is that Obama used his leverage during the bailout to get some concessions from the automobile industry. (That shows you why government is so “generous.” The money comes with strings. NPR reports:

There’s another element of the president’s auto agenda, though, that’s not looking so good: the drive for better fuel economy. In 2011, Obama struck a deal with automakers to sharply increase their vehicles’ efficiency. The move was designed to save money for consumers. It was also a key ingredient in the president’s recipe for reducing heat-trapping carbon pollution linked to climate change.

“By the middle of the next decade, the cars and trucks we buy will go twice as far on a gallon of gas,” Obama promised in 2013. “That means you’ll have to fill up half as often; we’ll all reduce carbon pollution.”

So manufacturers made smaller, lighter, and less safe cars that get better mileage.

Consumers aren’t buying them.

“There’s kind of two competing forces here,” Schoettle says. “The automakers are doing what they can to improve the technology and the vehicles and make the fuel economy for these better and better each year. But on the other hand, you’ve also got the consumer behavior and what drivers want to purchase and drive around.”

Automakers aren’t likely to discourage consumers from switching, since trucks and SUVs are typically more profitable than cars.

Once again the market beats the government.