Obamamobiles

In the May 20 Wall Street Journal, columnist Holman W. Jenkins, Jr., referred to “Obamamobiles.” What’s up with that?

It’s straightforward and scary.

Automakers hit tough times, and two of those companies took government bailouts. Of course, with government handouts comes government meddling. And President Barack Obama is proving to be an all-pro government meddler.

On May 19, for example, the President declared that automakers would have to meet far tougher fuel efficiency mandates. By 2016, CAFE standards would 35.5 miles per gallon – 39 mpg for cars and about 30 mpg for light trucks.

So, the President’s idea is to force U.S. companies that are having a tough time with massive losses to make less profitable vehicles. Huh?

In effect, the President has decided that politicians know better than consumers. The political class will dictate what kinds of vehicles are made, rather than companies competing to serve consumers. For good measure, these government CAFE dictates translate into more costly and more dangerous (physics dictates that smaller and lighter vehicles mean more dangerous vehicles for passengers) autos.

None of this is good for automakers, for the many small businesses involved in the auto industry, and for vehicle consumers (again, including small businesses).

Jenkins has been doing fine work picking apart much of the Obama industrial policy agenda. In the May 20 column, he observed:

With his latest installment of ever-higher fuel mileage requirements for the auto industry, Barack Obama embraces a momentary, crisis-spawned expansion of the art of the possible, unleavened by any art of the rationally desirable. Detroit is dependent on Washington loans for survival. The industry's lobbyists and its congressional allies have collapsed in a heap, offering no resistance. So why not go for broke? If you're alone in front of the shrimp buffet, why not eat all the shrimp -- even if it makes you barf later? …

So far, the Obama administration has yet to lay out its magical thinking on how the homegrown auto makers are to become "viable" when required to subordinate every auto attribute that consumers find desirable in favor of achieving a passenger-car average of 39 miles per gallon by 2016. Nonetheless the answer has quietly seeped out: Taxpayers will write $5,000 or $7,000 rebate checks to other taxpayers to bribe them to buy hybrids and plug-ins at a price that lets Detroit claim it's earning a "profit" on its Obamamobiles.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council