Monday, May 15, 2006

Warning: Political Speech Ahead

You have to be careful when politicians start talking, because much of what they say seems truthful, but when you actually look at the facts thy are typically half-truths at best. Senator Obama teaches us this lesson well with his latest populist diatribe.

It seems like every year, as soon as headlines start announcing "Pain at the pump" and Americans start emptying their wallets to fill up their tanks, politicians revert to their Rolodex of responses, from tax rebates and tax holidays to investigations into price gouging by oil companies.

None of these proposals would do any harm, and many will provide Americans some temporary relief at the pump.

Wouldn’t do any good either, tax breaks would be eliminated as the price of gas went up to reflect the true price reflected in current supply and demand. And if you feel that generating additional profits for Saudi Arabia and Iran are bad, then his assertion that no harm would come is certainly false as well.

We must start by producing cars that use less oil. The auto industry has not been asked to raise fuel economy standards in 17 years, and lately both Republicans and Democrats have stopped asking.

That simply isn’t true. Car manufacturers HAVE produced cars that have higher fuel economy standards, hasn’t Barack jumped on the politico bandwagon of driving to photo-ops with his hybrid? And its not just the hybrids that have better numbers, plain Jane small cars have better numbers as well, people just aren’t buying them. Senator Obama needs to get off his high horse and stop blaming Big Business for the ills that he sees, businesses can only do so much.

But auto executives are right when they say that transitioning to more fuel-efficient automobiles would be costly at a time of sagging profits and stiff competition, and that's precisely why the federal government shouldn't let the industry face these costs on their own.

We should strike a grand bargain with the Big Three automakers whereby the government picks up part of the tab for retiree health care costs -- a tab that ran almost $6.7 billion just last year -- in exchange for the car companies using that savings to invest in more fuel-efficient cars.

What a brilliant tactician, he picks up three huge constituencies in one fell swoop. Unions love healthcare and any action that protects their jobs, enviro-nuts love fuel-efficient cars and Big Business loves free money. What I don’t understand is why government funded health care for GM is OK when it’s a free hand-out, but when Wal-Mart employees get it when they are eligible for Medicare it suddenly is a big deal. And can someone please explain to me what retiree health care has to do with R&D? I just don’t see the connection.

Already, some cars on the road have the flexible-fuel tanks necessary for them to run on E85, a cheaper, cleaner blend of 85 percent ethanol and 15 percent gasoline. But millions upon millions of cars still don't have these tanks.
It's time for automakers to install those tanks in every single car they make, and it's time for the government to cover this small cost, which currently runs at just $100 per car.

It's also a time to start making E85 fueling stations more available to the public. Currently, only 681 out of 170,000 fueling stations in America offer E85 pumps. This is not acceptable. Every American should have the choice to fill up their car with E85 at any fueling station. And oil companies should stop standing in the way and join us in making this happen. If the big oil companies would devote just 1 percent of their first quarter profits this year to install E85 pumps, more than 7,000 service stations would be able to serve E85 to hungry motorists.

This is a prime example of a politician that doesn’t understand economics. When every car in America starts filling up with ethanol where is all this fuel going to come from? Even with the substantial subsidies given to ethanol producers the product is almost as expensive as gasoline, and the recent Congressional mandate to include more ethanol in all gas has caused the price to increase almost three-fold.

What also doesn’t make any sense is that we are, supposedly, trying to make our fuel supply less volatile – so the solution is to tie security to how well corn grows in Iowa? Talk to any farmer about floods, droughts, bugs, tornados or any other natural disaster and you will think twice about tying the cost of your daily commute to agriculture.

The solution is easy, undue the decades of restrictions on supply, ease the burdens of investment and the entrepreneurs will figure out a solution. Let government get in the way, and we will have $500 mouse traps and inventions that don’t work for problems that no one needs fixed.

It’s high time that we demand politicians attend a semester of Econ 101 before making their first trip to Washington, we could same millions of dollars in wasted time spent correcting their elementary mistakes.

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