Clive Crook on CAFE

Clive Crook says:

• A stronger CAFE is better than what we have now
• A full-fledged gas tax would be better than a stronger CAFE
• There is little chance of a full-fledged gas tax
• I'm against a stronger CAFE

I think I am missing something.

Here is Clive Crook:

FT.com / Comment & analysis / Columnists - Posturing will not save the planet: The website of the Sierra Club, the environmental group, says that “the biggest single step” America can take to reduce global warming and save consumers tens of billions of dollars is to adopt a stricter corporate average fuel economy (Cafe) standard. Legislation that would force carmakers to sell more fuel-efficient cars is being debated again on Capitol Hill. A lot of people think the Sierra Club is right.... Thomas Friedman, the trope-injected megapundit of The New York Times....

Far from being the biggest single step the US can take on this issue, tighter Cafe standards might be the smallest single step – apart that is, from doing nothing, and doing nothing at least has the virtue of being cheap.... Support for a stricter Cafe rule is not a sign of being serious about climate change but just the opposite.... In the end, a tighter rule would make America burn less gasoline and emit less carbon dioxide than otherwise – but not that much less....

It is bad that the underlying cost of Cafe is hidden, but worse that its effects are misdirected. The climate does not care whether greenhouse gases come from Hummers or Priuses.... Make all carbon-based energy dearer and innovation on a wide front will follow, as it must if this problem is to be seriously addressed....

Switching to a lower-carbon economy has a cost. A high tax on gasoline makes it explicit, and is therefore dismissed as politically impossible. But the idea that the Cafe approach is costless, or that its costs will fall entirely on companies that had it coming anyway, is infantile. Given a choice between the ambitious and the fatuous, is it not better to press for the first?

And is the carbon-tax approach really so unrealistic?

Its chances are not improved by calling for inferior alternatives. A lot depends on who speaks up for the idea. Mr Dingell, so criticised by Mr Friedman and others on this issue, is trying to drum up support for a gas tax, a carbon tax and a cap on mortgage-interest tax relief for energy-guzzling houses. He has put draft legislation out for comment. Sure, Michigan’s Mr Dingell is in the pocket of America’s car companies. That does not mean he is wrong.

"Trope-injected megapundit Thomas Friedman" is very good. But methinks Clive Crook is naive. If a high tax on gasoline had a snowball's chance in hell of passing, Dingell would be leading the opposition to it. He is only supporting it because he thinks if he holds it out there he can get some naive individuals like Clive Crook to oppose CAFE, which might pass.

Clive Crook is, I think, still a grasshopper in politics: unable to snatch the pebble from the hand.

Comments

[jerry]

Which b-school aphorism do I put my faith into?

The perfect is the enemy of the good? (Says to pass the CAFE Tax) (actually an MIT-School saying)

Sometimes it is smart to burn your bridges! No retreat, no surrender! (Says to abandon the CAFE Tax and press to MECO.)

[Nathan Myers]

Influential people arguing that CAFE is too weak, and pushing for a carbon tax instead, make it more likely that we just might get CAFE this year, and maybe carbon tax next year. If people were arguing only for CAFE, we almost certainly wouldn't get even that. It's called "covering fire", and the right wing extremists use the trick successfully all the time.

[Tobias]

You're harsh, but perfectly right, Brad. To me, Clive Crook is a symbol for the decline of the Economist in the first term of the Bush administration (Crook was a deputy editor until 2005): smart and eloquent, but unable to take a clear stand against obvious nonsense coming from the conservative side.

[Slocum]

Taxing new vehicle fuel economy is a much worse idea than taxing actual fuel use. But if you're going to have a sliding tax on vehicles based on their mileage rating, then just do *that* rather than require every car company, large and small, to make the same balance of vehicles.

What I really despise, though, is the general approach of addressing problems not by acknowledging and paying the costs transparently, but rather by identifying a particular set of corporate 'bad guys' and 'punishing' them (pretending not to notice that the result of 'punishing the bad guys' is an inefficient, distorting stealth tax on everyone). That is just an awful way to govern and to solve large problems.

[bakho]

What is his basis for saying that CAFE standards are a weak remedy? The biggest jump in fuel economy in the US EVER was in the late 70s early 80s when the CAFE standards of Ford and Carter took effect. Since the CAFE standards have been abandoned, cars have actually become less efficient. The historical record on CAFE standards is clear.

We have efficiency standards for air conditioners, refrigerators, dryers, washing machines and even flush toilets. We have them because they work. In the absence of efficiency standards, those that conserve energy subsidize those that waste energy.

My own view is that fuel prices need to be kept high through taxes to maintain support for CAFE. The money collected on fuel taxes could go to keep bridges from falling into rivers. Currently the money is going to oil exporters and Big Oil companies that are not investing in our economy. Dingell is fighting for a short term victory that will lead to long term loss.

[anonymous]

Cut payroll taxes, using gas/carbon tax revenues instead. Taxing pollution in support of energy security and national security instead of taxing labor should not be a hard sell. Even Bush and Reagan's economic advisors (Feldstein, Hubbard, Mankiw, Schmalensee) agree. Virtually every other industrialized country already does it with ease.

It's a testament to how timid liberals and liberal economists have become that they are afraid to even make this case anymore. Lead, don't simply follow the latest polls.

[bigTom]

We need CAFE (admittedly Carbon & Oil taxes would be superior) to begin getting ready for scarcity pricing of oil. I take the view that the world is going to consume all of the economically pumpable oil, so cutting oil consumption locally will have no (or very little) net effect on global CO2 emmisions from oil. But we need to do it anyway, and quickly. If the IEA is right serious price rises for oil (well beyond what we've seen so far) may come as early as 2009, we are way behind the curve.

I see high oil prices as the only real brake on world oil demand. Without significant near term conservation efforts the market price of oil will reach levels that are damaging to the world economy in the near future.

[Jim W.]

The politics behind broad-based energy consumption taxes in the US hasn't changed in many years. The regional distribution of energy use is very diverse. The Northeast uses a lot of heating oil, the South uses a lot of energy for air conditioning, big cities use relatively little gasoline, the Sunbelt uses a lot of gasoline, the Midwest uses a lot of coal. So any particular energy tax proposal tends to disadvantage certain regions of the country, whose Senators then team up with their colleagues who reflexively oppose any tax increase to defeat the proposed new tax. The only exception has been gasoline taxes when the revenue is dedicated to transportation so that the spending is distributed regionally in rough proportion to the tax burdens. Until the politics changes, or someone gets very creative in designing an array of taxes that is perceived as regionally neutral, CAFE (or, alternatively, a gas guzzler tax) is the best hope for using tax policy to advance energy conservation.

[anne]

A stronger CAFE is better than what we have now

A full-fledged gas tax would be better than a stronger CAFE

There is little chance of a full-fledged gas tax

I'm against a stronger CAFE

Stronger fuel efficiency standards are better than the meaningless standards we have had these 20 years.

Stronger fuel efficiency standards are better than a regressive gas tax, a lot better.

There is happily no chance of a regressive gas tax this year or next year, because, well, rational legislators remember hoe a certain governor of California came to be elected. "Hasta la vista, Baby."

I'm for stronger and strong fuel efficiency standards and against taxing my beloved gas (watch me burn).

[anne]

Notice how the modern gas moralists always know the problem is me and my gas burning and never ever say decades of America vehicle makers fighting fuel effiency increases no matter the cost to them. I should of course trade my Prius for a Hummer, but then I would have to mount a machine gun and I am afraid of loud noises.

The heck with gas taxing and gas taxers. "Hasta la vista, Baby." Who was that guy?

[PSP]

Why CAFE is better than a gas tax in every way that matters:

1) In politics, a disguised tax is always better than an express tax, even if it is less efficient;

2) In fact, concocting a relatively efficient disguised tax to achieve a political goal is really really good political economy;

3) A gas tax is just another form of sales tax and is inherently regressive.

4) CAFE, on the other hand, forces the buyers of even more expensive gas hogs to subsidize the buyers of cheaper more efficient cars. For example, Ford Crown Vic buyers subsidized Ford Escorts. It is a progressive tax to the extent that poorer buyers do not decide to pay the price for a gas hog. Any economists who so fancies should have no problems mapping the utilities there, although I can’t imagine why anyone would bother.

5) To get the same effect, a higher gas tax would have to fund tax credits to Prius buyers. Don’t hold your breath.

This is a perfect example of why the academy needs to develop a domestic version of political economy far more than the world needs to listen to economists.

[anne]

There is another real radical way to fuel efficiency. We could get the heck out of Iraq, immediately and completely. How's that for a radical way to save? Then, I would not have to buy a Hummer or a machine gun and I could trade in my shotgun brace on the roof which is ruining the trim of the Prius. No worry, I am always "packing." (I know the language.)

Stop the occupation of and war in Iraq, and count the gas saved. There's an idea for them there moralist gas teaxers. Get it?

[anne]

PSP is a genius, and I will accordingly steal the precise argument.

"1) In politics, a disguised tax is always better than an express tax, even if it is less efficient;

"2) In fact, concocting a relatively efficient disguised tax to achieve a political goal is really really good political economy;

"3) A gas tax is just another form of sales tax and is inherently regressive."

So much for a Hummer or machine gun.

[jerry]

+1 for PSP's comment. Insightful. Pithy. Would read again.

[Michael Sullivan]

A stronger CAFE is better than what we have now

I think this is not an accurate assessment of Crook's claim. He does explicitly admit that a stronger CAFE would reduce carbon emissions, but also talks about hidden costs, leaving clear the impression that he believes the benefits are not worth the costs.

I disagree with that assessment (depending on how much stronger we're talking about), and he provides no actual evidence about those costs, merely implying that they are too high with a lot of hand-waving.

But he does not make the obvious logical implication error that you imply here. On my reading, he believes that stronger CAFE standards are a wash or slight negative, with costs that offset the small benefits.

[sd]

"1) In politics, a disguised tax is always better than an express tax, even if it is less efficient"

Wow - looks like its not just the dreaded neoconservatives who are Straussians now. To hell with all that "of the people, by the people and for the people" crap - better to pull the wool over the eyes of the electorate if that's what it takes to push through public policies that their betters think are neccessary.

[PSP]

SD

Any regulation can be described as a hidden or disguised tax. The WSJ especially loves that gambit. No pulling of wool required, except by the editors.

[andres]

anne: "I'm for stronger and strong fuel efficiency standards and against taxing my beloved gas (watch me burn)."

No chance of that, anne--Lucifer will fire you as soon as he realizes how much of the Inferno's allotment of bandwidth you are going to take up ;-)

And while H2s and machine guns are an alluring vision, my own pet invention project (which I'm working on in my garage) is a machine gun recoil-powered bicycle. No pedaling, and the gun could fire either blanks or actual bullets for increased propellant power. Also, the increased use of bullets not only reduce the carbon footprint, but would make it more difficult to supply our military, thus helping to bring the Iraq war to a faster end. What's not to like?

Ok, enough hallucinogens. I can often be as dogmatic as they come, but on some things I like to be a contrary pest. So here are some counterpoints to PSP's bold theses:

(1) In politics, disguised taxes can only be disguised from the public, not from the private industries who will be most affected.

(2) Thus the disguised tax will have to be passed over their dead bodies and the dead bodies of the legislators they finance. Interest group resistance strikes again, and is a strong reason why disguised taxes are lousy political economy unless they have overwhelming popular support. But if they did, they wouldn't be disguised now, would they?

(3) A gas tax is regressive only if the generated revenues vanish into the government's coffers. If the revenues are fully redistributed to the public on a per capita basis, a gas tax would tend to be both efficient and progressive in an accounting sense.

(4) CAFE does lead to an indirect subsidy of smaller car drivers by bigger car drivers, but this effect would be delayed since it applies only to newly manufactured automobiles. A revenue-neutral, redistributed gas tax would have immediate subsidization effects.

(5) A revenue-neutral, redistributed gas tax would be a credit of its own to Prius drivers insofar as the Prius (and its ilk) is still not the central tendency the US population, though it may seem that way in San Francisco.

While I strongly sympathize with CAFE and agree that a simple gas tax is highly regressive and therefore unpopular, a revenue-neutral redistributed gas tax is imo the best way to go, especially as it would apply an indirect rather than a direct boot to US auto makers to increase fuel efficiency.

[save_the_rustbelt]

Michigan is in the 7th year of a 1 year recession, so do not expect any complacency from Dingell.

The GOP dwarfs came to Michigan and told the residents to eat cake, and the DNC Dems are busy antagonizing Michigan, so the old bear Dingell will continue to hold great sway.

Not a great way to make policy.

[Emma Anne]

Put me down in the pro-CAFE, anti regressive-taxes camp. And no exceptions for SUVs.

[Tuco]

Hardships from improved CAFE standards?

Hardly. Americans don't really need those full size Osama-Bin-Laden Signature gas guzzling SUV's and trophy trucks, they just don't, so stop making them. Instant CAFE improvement.

Gas tax.

So the huddled masses are forced to, well, huddle at home while the well-to-do marvel at how much they appreciate having less crowded road conditions for their Osama-Bin-Laden Signature gas guzzling SUV's and trophy trucks. A Republican utopian vision for the US to be sure.

[anne]

Cleverely and interestingly argued, Andres. I am with the more peaceable Emma Anne, but must think whether this is realistic as I would hope with another Administration.

[PSP]

Andres,

Don't forget administrative costs. At best 10% or 20% of your tax would disappear into the costs of moving money around, making lists of who gets payments, cutting checks, collection, combatting fraud, etc. The efficiency is ethereal.

[Jacob]

I don't think that the gas tax will necessarily force the masses to stay home while the selected few drive around. Certainly, there will be a painful transition period but consumers and car manufacturers will take steps to adjust.

People who currently drive SUVs without any good reason for it will switch to driving midsized cars, those who have a valid reason for driving SUVs will at least rethink those reasons, current midsized car drivers might consider driving compact cars, current compact car drivers already use relatively little gas but they could also consider switching to subcompacts, etc. More people will consider using public transport which could create a push to improve America's dysfunctional public transportation. People who opt for cars with big V6 and V8 engines will look harder at the options with 4 cylinders, diesels, or hybrid motors. And of course, the shoppers will look for the cars with the best gas millage in class, so there will be a pressure on the car makers to make more efficient cars, and they will adjust too. Finally, people will make smarter decisions regarding where to live, work, shop, etc. The daily 1-2 hour commutes will look less attractive and people will opt to live closer to work, which I think will make our cities better, greener, more compact, and less sprawled out. The current car culture and the resulting sprawl have destroyed most of American cities. What we have here for most part, are not cities in the Europeans sense. So, hopefully, not only the gas tax will adjust people's transportation choices and lifestyle, but our cities might actually improve as a pleasant side effect. But of course, the fact that the gas tax is regressive is apparently sufficient to make the bleeding heart liberals to forego ALL of these benefits and instead adopt a tighter CAFE standard which will change almost nothing. It will only bring more driving, more inefficient city planning, dysfunctional public transport as usual, more sprawl, more people buying cars that they wouldn't need in the first place in well-designed cities with functioning transport, and more people buying SUVs and other wasteful kinds of vehicles simple because they can.

[factory rat]

Brad,

You are going to have to eat your words on Dingell. We will likely have an energy bill with CAFE sometime this session. When CAFE passes and Dingel stays on the same course, will you recant in public? BTW, Dingell is backing a CAFE bill now that is ~90% as strong as the one you like. Is that a charade too?

[Yep...]

[Slocum]

OK, you've convinced me. Maybe I should just switch to deciding such issues on the basis of self interest. For example, our days of wanting a larger vehicle to transport kids are drawing to a close. Without family transport to consider, my wife and I prefer fuel-efficient, fun-to-drive vehicles with manual transmissions, which enables us to travel by car at a lower cost (which we like to do quite a lot -- and will have more time to do in coming years). Also, we like to drive to the cottage on weekends.

So if all y'all lefties want to have purchasers of family vehicles subsidize us soon-to-be-empty-nesters when we buy a new car, why should I argue? And did I mention that my wife and I like to travel by air? A carbon tax would cost us money there, but CAFE changes will subsidize our vehicle purchases, give us some more $$ to spend on flights to Europe, and leave the cost of air travel untouched. Thanks.