Brad Causey
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The Freedom Letter
v5n1
Wave the Magic Wand
9/2/2007
We all remember the various children's movies where the witch waves the magic wand and something good or bad happens. Magical or extraordinary powers are also the common realm of science fiction. Now, the same philosophy is apparently shared by various members of the United States Congress and certain members of the Executive branch.
I am referring the propensity of government officials, either elected or appointed to make various false assumptions. One, that they have the authority to do something about said perceived problem. Two, that their proposed solution (which always includes more money and bureaucracy) is actually an improvement. And three, that their "solution" does not have adverse side affects.
Example number one: As part of the "energy bill" the Senate is proposing to increase the average fuel economy of our vehicles by raising the CAFÉ (corporate average fuel economy) standards. The current law is 27.5 MPG. They are proposing the average be raised to 35 MPG by the year 2020. I would argue, that with the possible exception of Interstate Commerce, Congress has no authority to mandate the efficiency of anything, including passenger cars. That said the current standard of 27.5 means that an automotive company must achieve a fleet average of 27.5 miles per gallon on the vehicles they sell. What is the penalty for violation? Fines, of course. The reality is this: Last month the best selling vehicle in America was the Ford F-150 pickup truck. Close behind is the GMC Sierra/Chevrolet Silverado, the GM equivalent. This means that people happen to like large pickup trucks. Large pickups do not generally come anywhere close to 27.5 mpg. (My F-150 is lucky to get 17.5) So, this means that although the American consumer actually likes big trucks, Ford and GM are forced to offer incentives on the Focus and the Cobalt to make up the difference in average fuel economy. Even if they must lose money on the small cars. Since GM lost 10.5 billion dollars in 2005 and Ford lost $12.6 billion in 2006, this does not seem to be a good plan. The fines the companies might pay would simply increase expenses, even more, therefore increasing the price we pay for vehicles.
I realize that Ford and GM have problems other than government mandates, but why do we accept any law that only makes the politicians feel good? Actually, the current CAFÉ law is much worse than merely assisting our core industries to self-destruct. It is actually killing us. In the early 1990's the President's Council of Economic Advisors determined that the CAFÉ law as currently enforced resulted in 12,000 additional highway deaths per year. To put this in perspective, in the last twenty years one average American city of 250,000 people will have been completely depopulated. The reason is that mileage is simple physics. To move a certain size object at a certain speed, a quantity of energy is required. Americans like space, which translates into living in the suburbs and buying vehicles big enough to make them comfortable. So, if one is going to achieve any artificial standard (say 27.5 MPG) then something must give. Since large cars and trucks traditionally outsell the little ones, the only way to achieve better mileage on vehicles people actually want to buy is decrease the weight of those vehicles. In a collision, the bigger the heavier the better. So, by forcing car companies to design lighter and therefore less crashworthy cars, we have succeeded in increasing the rate of highway deaths. The 1993 report of the President's Economic Council referenced above said it well. "Government regulation has perverse and unintended consequences."
No one will argue that using less fuel is a worthwhile goal. However, in a free country, it should be left to individuals and companies in a free market to determine what is reasonable. Some will buy huge vehicles, because the cost of fuel is not relevant to them. Others will buy a small car because they like them or because they cost less. What is the proper amount? I don't know the answer to that question anymore than I can tell how much money you need. It is a matter of personal preference and ability.
Example number two: The Ethanol mandate. The President has proposed that the nation be "energy independent" by a certain date. First let's discuss the goal of Energy Independence. Sounds good doesn't it? Yes it does. Can anyone out there name the small group of countries that have achieved this goal? Think for a minute. Saudi Arabia? No. Kuwait? No. Iran? No. And the list goes on. Of the almost 200 members of the United Nations, not a single country is energy independent. The Saudi's, although rich in the raw material of oil, do not have enough refining capacity to satisfy their own needs. The United States, lacking the raw material, does have (barely) the refining capacity. And the list goes on. Energy independence as a nation (or as an individual) is an impossible goal. Perhaps, at great expense and personal sacrifice it could be done. Maybe. Also, maybe just maybe, everyone will be nice to one another, eat three meals a day, sleep 8 hours a night, and attend church regularly. World Peace and Tranquility sound good, but no rational person is expecting it anytime soon.
The President in his state of the Union address, and the Congress in proposed legislation, are mandating a certain quantity of our fuel be corn-based ethanol. We have had subsidies for years to encourage the production of Ethanol. Last years budget expended 6 billion dollars for that purpose. The concept of "renewable fuel" sounds very good on the surface, but the reality is not so satisfying. Ethanol made from grain requires more energy to produce than does an equivalent quantity made from oil. (between 1.5 to 1.8 times to be precise) So, we start out with ethanol actually costing more than gasoline. In addition, ethanol is much more corrosive than gasoline, so if it is used to fuel a vehicle not designed for it, it will eat all the rubber components of the fuel system. This will result in either being stranded, or worse yet, a fire. Sound good so far? It gets worse. Ethanol, and fuels blended with it are less efficient for your engine. A personal example. Last year while traveling between St. Louis and Chicago on I-55, I purchased fuel in Illinois. (A different vehicle than the Ford mentioned previously) The only type they had was an ethanol blend. So, at $3.42 a gallon, I filled the tank. The car did not seem to run any differently, but my mileage dropped from 22.5 to 17.3. It stayed between 17 and 18 MPG until I was able to purchase real gasoline again in southern Indiana. My mileage then immediately returned above 21 MPG. Looking for another consequence? During the past year, the price of a bushel of corn has increased from $2.50 to over $4.00 as a direct result of government intervention. (I think we all know that corn is a food source) So, our government thinks it is a good idea to sell more expensive, less efficient, and more dangerous fuel as a solution to high gas prices, and increase our cost of food at the same time. Does anyone out there see a problem?
How does the average member of Congress get to work? First they get on a plane from their districts. Once in Washington, they either walk, take the Metro, or more likely, are chauffeured in a Limousine at taxpayers expense. Most were wealthy long before they ran for elected office. The balance have achieved comfortable wealth while serving in office. Perhaps this explains why they think they are doing good, while actually doing harm.
Whether it is the mileage of vehicles, the fuel we buy, greenhouse gas emissions, the food we eat, the programs we watch on television, how we use our land, or the amount of water used by our showers and toilets, there is hardly a single aspect of our lives that is not in some way, regulated by the Federal Government. Every regulation has an expense and an unintended consequence. When are we going to start saying no?
Waving the magic wand is the stuff of fantasies. It is also the current mantra of Washington D.C. Perhaps all of us should try living a little closer to the real world.
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