- The Washington Times - Monday, September 15, 2008



Thomas H. Desabla’s eloquent Thursday letter, “Government rarely fixes itself,” amounts to a gross understatement. In fact, a day rarely goes by when so-called government reform does not make things better in the short run but far worse in the long run. You need look no further than energy policy, which apparently Mr. Desabla lacked the space to address.

Remember mileage standards way back in the 1970s? The idea was to use less gasoline and wean ourselves from foreign oil. The bad old Big Three automakers were the culprits, so the plan was to regulate them with mileage standards. Well, foreign oil turned out to be a gusher at U.S. ports, and the Big Three were caught between a rock and hard place.

They had to make massive investments in small cars that nobody wanted to meet the mileage goals but also produce the gigantic sport utility vehicles, vans and monster pickup trucks that the vast majority of the market would pay a premium to own. Fortunately, those premiums paid for the off-the-chart union benefits that had been negotiated. Also, contrary to popular opinion, the foreign automakers did the same thing. They cashed in on big cars and trucks because gasoline was cheap. The only reason they maintained any edge on small cars was because they were not saddled with the Big Three’s legacy union costs.

U.S. auto companies really have just two options. They can pull out of the U.S. auto market entirely; after all, they are succeeding in Europe selling small cars. Or they can appeal to Congress for a bailout, which they are doing already. Where does Congress stand? Its members are the culprits. If public policy demanded less gasoline usage, Congress should have levied a $5-per-gallon tax on gasoline. Small cars would have demanded a premium, and SUVs would be few and far between. Instead, gas will remain cheap, the Big Three will get that bailout and, you guessed it: Your taxes will go up to pay for the stupidity.

The only thing that reformed the U.S. economy of the 1930s was the beginning of World War II in the ‘40s. If New Deal bailouts and inept regulation are in our future, you can expect the worst for a very long time.



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