CAFE

No, I am not going to write a restaurant review. I am going to discuss Congress' latest attempt to violate several laws of physics and dictate consumer tastes as well as their inability to foresee unintended consequences.

CAFE is the Mandated Fuel Efficiency Goals for the American Automotive Industry. In the efforts to fight global warming and to decrease fuel consumption, congress wishes to increase the Average MPG of the sold car in the U.S. For many years they have been upset at the American automotive industry since they continue to produce low MPG vehicles such as SUVs, Hummers, and huge pickups. That the American consumer continues to wish to purchase these vehicles instead of smaller more efficient vehicles that Congress believes should be purchased. So Congress wishes to punish companies for producing what consumers want : a losing battle.

In addition, mandating higher MPG is attempting to imagine the impossible possible. Why stop at 25 MPG as today or 35MPG as desired. If so, why not demand 100 mpg? Because some limits exist that cannot be surpassed.

Unintended consequences? How can car manufacturers create vehicles quickly that meet the higher standards? By creating smaller and lighter vehicles. Which are safer, smaller lighter vehicles or bigger, heavier? A non-question if one ever existed. Another clue: the number of semi-trucks on America's highways are expected to double if not triple by 2020. To modify a famous quote: Semi hits little car, little car folds; little car hits semi, little car folds; either way the smaller car gets it. To place smaller lighter cars on busy interstates full of large semi-trailers is only a sure recipe to record auto fatalities. No, for Congress, the immediate plus is having created a law that looks and sounds good now, the unintended consequence of rising auto fatalities is in the far future, well beyond the next electoral cycle.

So what do we do? If Congress wants to increase the average MPG for the American auto fleet, there is a surer more effective means. Tax the consumer not the manufacturer. Every vehicle on the road must be tested annually. Congress can then set the desired MPG levels: say 25MPG today, 27 MPG in 2010, 30 MPG in 2015 and 35MPG in 2020. If the car meets the standard level, no tax is due. If the car falls below, an annual tax (that can be set by Congress) is due. The worse the efficiency, the higher the tax due. On the other hand, if the car exceeds the said standard, a substidy can be paid to the owner, the higher the MPG, the more the substidy. It is up to the consumer to decide if he/she wishes to pay the tax. He could still buy a hummer of SUV if they wish, knowing the tax. Congress could annually up the tax and change the desired MPG level accordingly. Consumers could still buy what they want and Congress could (by manipulating the rates) reach the desired levels.

Provide consumer choice and still reach your desired MPG, that sounds like a win-win proposition