Higher Federal Fuel Taxes for All

Today is the day executives from the Big 3 Detroit automakers; Ford, GM and Chrylser go to see Congress, hat in hand, to ask for more money. In exchange for this largess, they’ll be told what kind of cars they need focus on in the future.

What do members of Congress know about the auto business? Well, nada, of course. What qualifies them to dictate to those who presumably have expertise in the business what kind of products will return them to profitably? As with many things Congress meddles in, they have no expertise. Of course, that hasn’t stopped them from meddling in the past, and I seriously doubt it will in the future.

One of the things that has been reported in various locations is that they’ll be strongly encouraged to produce new fuel efficient vehicles. The problem here is that car makers must produce what people actually want to buy. That’s one of the ways Detroit got into so much trouble in the first place. For about 30 years, until relatively recently, they made a fairly inferior product.

Oh, sure, there were exceptions, but on the whole, Detroit was soundly trounced in the product arena by offerings from overseas, such as the fine vehicles from Honda, Toyota, and Nissan. Americans responded as consumers always do, by voting with their checkbooks. The votes weren’t kind to Ford, GM, and Chrysler.

In the last decade they began to turn things around. Recently some pretty darned good vehicles have come from Detroit. World class, even. The new Cadillac CTS springs to mind. Other recent offerings from the Big 3 that bear mention in a positive light are the Silverado Pickup, the Corvette, Mustang, Chrysler 300, Pontiac G8, Ford Flex, and Chevy Impala. There’s also the upcoming Chevy Volt to consider, as a cutting-edge, new vehicle.

The problem now is that Congress wants the big three to produce the new, smaller, fuel efficient vehicle of the future. That sounds just great. Why is that a problem? It’s a problem because Americans are loathe to actually buy vehicles like that.

We want larger vehicles for larger families (and many times, smaller ones too), and American drivers have always had a love affair with power. As fuel prices recede from their record breaking spike of the summer, the chance of American drivers demanding cars like the Honda Fit in any kind of quantity will recede along with them. The fact is that the demand for these cars is almost purely economic. When people’s personal economies are impacted by high fuel prices, they turn to relatively fuel efficient vehicles.

Why would any of the big 3 auto makers want to produce smaller, more fuel efficient cars when the car buying public would rather be driving larger, less fuel efficient vehicles? Well the answer is, they wouldn’t.

They wouldn’t unless they could be guaranteed that there would be a demand for higher efficiency vehicles. Who could provide that demand? Why the meddlers we elected to Congress, of course. As incoming White House Chief of Staff Rohm Emanuel stated a couple of weeks ago, a crisis lets you do things you couldn’t get away with otherwise.

Many politicians and others would love to see higher fuel taxes. That would raise fuel prices, and that, in turn, would force American drivers to turn to smaller, more fuel efficient vehicles. Driving smaller vehicles that would consume something closer to “our fair share” of the world’s resources would make some tickled pink. That group would not include the majority of American drivers.

A bit of a back room deal would let so many groups be happy. The politicians would be saving the Big 3 and the environment at the same time. In addition, they can raise taxes on something with a fairly inelastic demand, so revenue will rise even as prices increase. You know they have to finance all these bailouts somehow.

The environmentalists would be thrilled that our resource consumption would be reduced. And the big three would be overjoyed to get their latest handout and the promise of some demand for their new products.

Over the long haul, more fuel efficient vehicles will have to be produced, as at some point in the future, prices will increase. The problem is that the development horizon, especially for advanced technology vehicles, is exceedingly long. That means that there will be a lag between when there is actually enough demand for these vehicles and when they begin rolling off the assembly lines.

There is also the question of cost. Such vehicles are very expensive, as new technologies always are. Does anyone remember the $4,000 PC? 15 years ago they were fairly common, but try to find one today that’s not a hot rodded, customized gaming rig. So it will be with new technology vehicles.

The problem for the average driver and taxpayer is that few drivers want to spring for the additional money it takes to purchase one of these cars. The new Chevy Volt will be about $37,000. That’s pretty steep for a 5 passenger sedan, when equivalents from Chevy, Honda and Toyota can be had for about 30% less than that. Toyota is still losing a bundle on every Prius they sell, even after almost a decade of production.

Why is this a problem for the taxpayer? Because you’ll be helping to pay for every one of these new vehicles that your neighbor parks in their garage, that’s why. There are hefty subsidies, in the form of income tax credits, to encourage their purchase by bringing their cost more in line with traditional vehicles. So, you’ll pay higher taxes to fund the industry bailout, the advanced technology vehicle subsidies, and the sure-to-be-on-the-horizon Federal fuel taxes. Make no mistake, driving will get expensive, even as fuel prices are dropping.

Who gets left out in all of this? Why the average, American driver, of course. Who kissers their ass in all this? Not those who they sent to Congress with their votes. Not the Big 3 execs, who will be glad to escape with a few billion and the promise of economic conditions that will favor the vehicles they’ve been directed to produce. Would someone please look out for the average driver?

Please Stumble My Post!

5 Responses to “Higher Federal Fuel Taxes for All”


  1. 1 Richard McLaughlin

    maybe we will finally get fuel efficient cars, once people get tired of paying so much. I’ll bet you a dollar that President Obama makes a tax break for better cars.

  2. 2 Steve

    We have fuel efficient cars now. Witness the Prius, Fit, Mini Cooper, and Echo. The problem is that few people want to drive them unless gas prices are stratospheric.

    Define “Better” cars. There already are hefty tax incentives for advanced technology vehicles. That basically means that every taxpayer is helping people buy a Prius, Civic Hybrid, Altima Hybrid….

    Think about this for a second - Is it fair that some people who can not afford a new car are helping others (who presumably can) buy one? That’s for you and the policy makers to decide, I suppose.

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