Government Regulates to the Mean, Plus More on Hidden Taxes
One of the seldom discussed problems with government regulation is that typical regulation is aimed at the "mean" -- the mean worker, the mean industry participant, the mean driver, whatever. The problem is that there are 300 million of us with vastly different lives and different preferences. One-size-fits-all regulations are often a poor fit for many of those regulated.
Take the Fair Labor Standards Act (which includes minimum wages, maximum work weeks, record-keeping requirements, etc). The Fair Labor Standards Act is written for factory workers who come in the door at 9AM, punch a time clock, work under the direct supervision of management, and punch out at 5PM.
Many of my workers are running isolated campgrounds. They work out of their home (their RV). While they have scheduled tasks, like cleaning the bathrooms, many of their hours come in spurts (e.g. someone comes to their RV and asks them a question). The nearest manager from the company might be hundreds of miles away, and there may not even be electricity to power a timeclock. All of this adds up to a hugely awkward compliance problem for many of the details of the FLSA. But comply we must.
Yesterday's new proposed CAFE regulations on car fuel economy is another example. It appears that the average MPG requirement for new cars will increase from 27.5 today to 42MPG in 2016. The obvious question is -- of all the actions we could take to reduce CO2 emissions, is this the least costly and/or most efficient?
Well, nobody knows, and I don't think that anyone in the "science-based" Obama administration has even tried to put pen to paper on this question. And, even if they did, their answer would be largely irrelevant because they would likely, again, be regulating to the mean.
I am sure the folks passing this kind of stuff picture a mean commuter driving 25-30 miles each day each way to work. But what about me? I drive 2 (actually 1.9, but we will round up). That makes a 4 mile daily roundtrip commute. Assuming I drive a car at the CAFE standard, this new regulation will save me 0.05 gallons of gas per day, or ten cents per day at $2.00 gas prices.
Obviously, it makes zero economic sense for me to be regulated in this way. The fuel economy of my car for my daily commute is virtually irrelevant, because I chose to locate my house and my business within a few miles of each other. It is a terrible investment for me to pay, both in higher costs and lost features, for a car with higher MPG. Though my decision-making was not driven by gas consumption (it was driven by my time, which is way more valuable to me than a gallon of gas**) one could argue that I have already made a huge gas-use-reduction investment in terms of the location of my home, and thus a further investment in gas-use-reduction via my car is not necessary.
On Hidden Taxes
We can tease one other lesson from this regulation. In regulating CO2 in transportation, the Obama administration had another choice -- a carbon tax. A carbon tax on fuel would easily cause CO2 emissions to be reduced over time from cars (in fact, it probably would do a better job, as history has shown that higher MPG standards actually lead to increased driving and thus have equivocal impacts on CO2 emissions).
Further, a carbon tax would have the advantage of putting 300 million people to work figuring out the most productive ways to reduce emissions. Those who drive most, or have the greatest ability to cut back on driving and shift transportation modes, are going to be the ones to preferentially reduce emissions.
So why not a carbon tax? Well, the politicians have all explained this pretty directly -- because they do not want to pay the political cost of raising taxes, particularly on something like gas whose price gets so much media attention. Having demagogued oil companies as evil for so many years for raising gas prices, politicians were not able to bear the irony of themselves being responsible for higher gas prices.
So instead, they will force cars to be built more fuel efficiently, which will almost certainly raise the price of cars (as well as reduce choice and certain features). These higher costs and reductions in choice are most certainly a tax on consumers, but they are an indirect tax. They show up as rising prices and perhaps falling attractiveness of auto makers' product lines, which consumers will blame on auto makers, not the Congress or Obama.
So Obama will continue to say he has never raised taxes on the middle class, when in fact he has just made their cars $1500 more expensive. Some day, we may live in a world where politicians are called to task for this kind of bait and switch, but my guess is that Obama gets away with it.
** Postscript: The one constant of all leftish regulation is that it puts about zero value on my personal time. Every regulation seems to be about my spending more of my time in exchange for conserving some other supposedly scarce resource. But I have never panicked that we are going to run out of oil or tungsten or iridium or whatever. But I do know that I am going to run out of time, just like everyone else. It is the only commodity I am positive is zero sum.
James H:
"But what about me? I drive 2 (actually 1.9, but we will round up). That makes a 4 mile daily roundtrip commute. Assuming I drive a car at the CAFE standard, this new regulation will save me 0.05 gallons of gas per day, or ten cents per day at $2.00 gas prices."
I wouldn't speak so loudly about that situation, Obama may have a solution for you that would eliminate that gas usage. Hearing about this, what if he decided to mandate riding a bike for short trips to save the planet? The EPA could rule that your short trip in a car isn't worth a polar bear's life and should be eliminated for the greater good of the planet.
May 19, 2009, 9:13 amBrad Warbiany:
Just wait until they get a hold of healthcare. If so, I hope you'll never contract a terminal (and politically unpopular) disease, or you'll be asked -- and by asked I mean told -- that your time left on the earth just isn't worth the expense to society.
May 19, 2009, 9:51 amGreg:
There's another reason why improving fuel efficiency doesn't necessarily reduce carbon emissions or gasoline usage: it encourages people to drive more. If your car gets better mileage, you spend less on gas, so driving becomes cheaper. And when driving is cheaper, people drive more. It's exactly the same effect as if you lower the price of gas.
Indeed, insofar as making cars more fuel-efficient raises their purchase costs, it may actually encourage people to drive more. Because you've shifted the cost of the car partly away from the ongoing cost of operation and towards an up-front sunk cost, and because you're less likely to feel you need to drive less if you're driving an environmentally-friendly car.
May 19, 2009, 9:54 amdave smith:
right on, greg. you'd think a "science based" government would consider it.
May 19, 2009, 10:46 amKevin Spires:
No blood for oil. How about the extra 3000 people per year that die from the current CAFE standards due to smaller, less crashworthy vehicles. How many more people will die in SMART care like go-carts? 5-10k per year? This administration is a joke. Reminds me of a romper-room mind set which says if we just wish hard enough we can imagine the results we want into being.
May 19, 2009, 10:53 amspiro:
Greg,
I'd add to that further with what I call the "diet coke" effect. i.e. just like fat people drinking copious volumes of diet coke as a weight loss aide (it does say "diet" on it, right?), the hybrid drivers I've met make efforts to drive their cars MORE, as a display to others of their concern for the environment. Almost as though the more miles they put on the car, the faster it refreezes the icecaps.
May 19, 2009, 10:54 amEvil Red Scandi:
I think that you all are really ignoring the benefits of AGW proponents using more fuel-efficient cars. From a natural-selection perspective, that is.
May 19, 2009, 11:36 amEvil Red Scandi:
On the less-snarky side, there's an even bigger reason not to do this: "It's not what you drive, it's how you drive it."
The BBC show Top Gear did an absolutely brilliant test of this. Watch the video here, and then pick your jaw up off the floor.
May 19, 2009, 11:52 amEvil Red Scandi:
And finally, since CAFE seems to be the topic of the day, here's Top Gear's Jeremy Clarkson on the new Honda Insight.
Money quote: "Really, to get an idea of how awful it is, you’d have to sit a dog on a ham slicer."
May 19, 2009, 12:26 pmDr. T:
"So Obama will continue to say he has never raised taxes on the middle class, when in fact he has just made their cars $1500 more expensive."
The ridiculous 42 mpg figure is an AVERAGE. No gasoline powered car gets that mileage today. Thus, to meet this average, the majority of automobiles will have to be gas-electric hybrids or electric cars. Minivans will have to be dropped from the lineup, because they only get 20-25 mpg. Large sedans will have to be dropped. The auto companies will sell Prius clones, Honda Fix clones, and lots of SUVs and pickup trucks (that don't fall under the regulations for cars). Under these circumstances, the demand for SUVs will be so high that prices will skyrocket (by far more than $1500 per vehicle).
Our used Honda Odyssey, in excellent condition, will probably be worth more than we paid for it new. People will hang onto their existing cars because of the lack of desirable new cars. The used cars will run more and more poorly over the years, pollution will increase, and the less efficient old engines will get lower miles per gallon, thus defeating the stated purposes of the draconian increase in average mpg on new cars.
May 19, 2009, 3:43 pmmarkm:
"The one constant of all leftish regulation is that it puts about zero value on my personal time."
Welfare clients have plenty of time. "Liberal" celebrities and politicians have people to fill out forms and stand in line for them, and are too important to drive small cars, travel on mass transit, or obey the other regulations that they can't hire "peeps" to observe for them. And if you don't belong to one of those classes, you probably didn't vote for them anyhow!
May 19, 2009, 3:47 pmBob Smith:
Cars weren't targeted because they thought that regulating cars was the best target of this kind of regulation, but because they hate cars. Really. Hatred of cars, and the mobility and freedom they give their owners, is de rigeur in liberal circles.
May 19, 2009, 5:02 pmBob Smith:
Oh yeah, the president is lying when he says that the extra cost of the car will be made up in 3 years on the gas you'll save. Taking his $1300 extra at face value (I don't) and a standard 12,000 mile year, a 35 MPG car saves 137 gallons, or a whole $274 a year at $2/gallon, over a 25 MPG car. Gas would have to cost $3.16 a gallon to have a 3 year breakeven. The only way this works if he also makes gas much more expensive.
May 19, 2009, 5:09 pmDKN:
"Gas would have to cost $3.16 a gallon to have a 3 year breakeven. The only way this works if he also makes gas much more expensive."
That's the secret message Mr. Smith, Obama will get gas back up to $4 or more(and Mr. Hu has stated he'd like it even higher). Bad for middle class folks certainly, WAY bad for lower income folks, you know, the ones Obama "cares" about.
Then, when those poor folks hurt bad enough and demand action, Obama will attack all those greedy corporations again, and tax the "rich" middle class, and get his 51% of the public on the dole and a permanent parasite/host society under "liberal" control.
May 19, 2009, 6:10 pmRick C:
Dr. T: "People will hang onto their existing cars because of the lack of desirable new cars. The used cars will run more and more poorly over the years, pollution will increase, and the less efficient old engines will get lower miles per gallon, thus defeating the stated purposes of the draconian increase in average mpg on new cars."
Wanna bet? All they have to do is tighten standards on your annual vehicle inspection, and you won't be allowed to keep that old car.
May 20, 2009, 7:50 amEvil Red Scandi:
Rick C: "Wanna bet? All they have to do is tighten standards on your annual vehicle inspection, and you won’t be allowed to keep that old car."
I doubt it. Even here in California you can get exemptions for older vehicles.
May 20, 2009, 8:10 amBobo the clown:
It is pretty clear that Obama's new vehicle emission and mileage standards are designed to prevent the entry of the Chinese into the US car market for as long as possible. That was probable the union's number one fear.
May 20, 2009, 8:57 ambud:
(Anthropogenic) Global Warming is a hoax, designed to increase gov't control. The evidence in right in front of you.
Then why give it ANY respect, as you do with statements like, "of all the actions we could take to reduce CO2 emissions"? "We" don't want to take any action, since it's all a big con.
Or do you actually believe in (A)GW? And spooks and lions and tigers and bears?
May 20, 2009, 2:27 pmLink:
Why don't we all boycott GM and Chrysler, and buy Ford cars. Except for the Corvette, is there anything made by GM or Chrylser that anyone would miss?
Even a 10% drop would blow up their numbers, and send a message. If instead Obama had his way we'll be looking at a permanant huge annual subsidy to carry the production and sale of Obamamobiles.
May 20, 2009, 7:16 pmJohn R:
The other side of the equation is to keep oil prices high by limiting supply, not drilling in the US, no coal gasification and no nuclear power, this will be a "tax" on consumers and will "help drive the choice" to more fuel efficient vehicles. The ten years to market is a high average by the way.
May 21, 2009, 9:45 am