While the events of September 11 have caused short-term economic pain to our country, the economy has proven to be resilient. The stock market has regained virtually all of the ground it lost after the attack, and consumer confidence remains strong in spite of the crisis facing our nation.
Now we must consider how Washington can aid this economic healing process and more importantly, what Washington should not do.
For his part, President Bush is continuing his fight to return money to the marketplace and lessen the financial burdens that our workers and industries face from government. The House of Representatives has wisely followed suit by passing a terrific stimulus package, mixing acceleration of the tax relief that is already in the pipeline to the American people, providing rebates for low and moderate income earners, and wiping out tax policies that punish investment in plants and equipment such as the hated corporate alternative minimum tax.
This is undoubtedly the approach that we need: Lighten the burden of government on our economy in this time of crisis. Yet at the same time the Congress is considering several stimulus proposals, it is considering adding to the burden of government by pushing through a massive increase in regulation that would squander any good the stimulus package would provide.
That regulation is the Corporate Average Fuel Efficiency standard (CAFE), which mandates the average miles per gallon of vehicles that consumers can buy in our county. The proponents of tightening already-strict CAFE regulations are arguing that a forced increase in the mileage of SUVs and pickup trucks is needed to reduce America’s dependence on foreign oil, especially oil from the Middle East.
Unfortunately, this is a shallow argument that conflicts greatly with history. The misbegotten CAFE policy was crafted in the 1970s as part of a Carter-esque attempt to impose a conservation regime on America that would reduce our dependence on foreign oil.
The attempt failed. When the CAFE law was passed, American dependence on foreign oil stood at 35 percent. Today, with strict fuel mileage regulations a matter of federal law, America imports more than 50 percent of its oil from overseas. The simple reason is that as fuel efficiency increases, consumers have always and will always respond by driving more.
(Beyond producing virtually no effect on oil consumption, the CAFE law did great damage. A 1999 study by Gannett News Service found that the regulation had forced consumers into smaller and lighter vehicles which in turn resulted in 46,000 deaths that would otherwise have been avoided.)
If automakers are forced to scrape together and install expensive new technologies they had not planned to implement, the result would be economic disaster; an increase in the price of every new vehicle of $500 to $2,750 and the loss of 100,000 American jobs.
As a result, tightening CAFE regulations would be the equivalent of a hidden but massive new tax on the economy, at exactly the time when it is struggling to recover. This is exactly the wrong direction to go.
The auto industry in America is responsible for 6.6 million combined direct and indirect “spin-off” jobs and it produces $242.8 billion in payroll compensation. Therefore, the health of this economic sector is an absolutely vital component in our nation’s ongoing recovery. And as always, the best way to ensure that the cars, trucks and minivans keep rolling off the assembly lines and onto the highways is for government to get out of the way and let automakers do their jobs. If Washington starts interfering in the auto industry even more than it does already, the consequences will be expensive.
An increase in CAFE standards wasn’t needed before the war, and with the economy slowly but surely getting back on its feet, increasing CAFE standards now would be the height of irresponsibility. One hopes that there are enough members of Congress with the common sense to vote this silly idea down resoundingly.
Grover Norquist is president of Americans for Tax Reform.