May 08, 2007

Obama Takes on Detroit

The knock against Obama is that he often shies away from confrontation, but yesterday he did waltz into a room full of Detroit businessmen and lecture them about the need for stricter fuel-economy standards. (The speech itself was pretty harsh, and he didn't exactly draw applause with lines like this: "Even as [automakers] shed thousands of jobs... over the last few years, they've continued to reward failure with lucrative bonuses for CEOs.")

To put this in context, the Senate transportation committee has just agreed to take up a bill that would increase CAFE standards to 35 mpg by 2019 (with no exemption for light trucks and SUVs, as Ted Stevens wanted), and raise them by 4 percent each year thereafter. Even though there's a "safety valve" that would allow the Department of Transportation fiddle with the standards if they don't prove "cost effective," many domestic automakers are reportedly planning to oppose the bill anyway. So it's nice to see Obama use his star-power to pick a fight and push for something substantive.

On the policy side, GM's complaint that CAFE standards have been "ineffective over the past three decades" is weak. When the National Academy of Sciences looked into it in 2002, it found that between 1975 and 1984--the last time CAFE standards were raised--fuel economy "improved 62 percent without any loss of performance." And: "If fuel economy had not improved, gasoline consumption... would be about 2.8 million barrels per day greater than it is." (Indeed, there's evidence that CAFE standards might even be more effective at reducing gasoline consumption than a gas tax alone, since gasoline demand is fairly inelastic.)

So at this point, U.S. automakers are left griping about the cost, and the Senate bill has a loophole for that. Detroit still has plenty of powerful allies--especially John Dingell in the House--but it's hard to see how they can fight this forever.
-- Brad Plumer 11:34 AM || ||