The Miles Per Gallon (MPG) standards of 2008 and 2011 have created an interesting real-world case of how the relationship between government and the larger economy should work –
- The government proposed – high miles per gallon standards
- The private sector disposed – developing more efficient automobiles that consumers actually want to buy without either
- government loans and grants or
- government tax credits.
In December 2008 Congress passed legislation that authorized the Department of Energy to spend up to $25B dollars in low interest loans to support the manufacturing of hybrid automobiles. To date, less than $5B of the money has been spent and no new hybrid car has yet to be delivered to automobile showrooms around the country –
In the meantime, according to Bloomberg Businessweek, automakers have found a way to satisfy BOTH customers and the government by building more efficient internal combustion engines.
While the absolute miles per gallon of a hybrid are slightly higher, the overall cost to purchase, to maintain and to comfortably drive a traditional automobile still makes it the compelling value for most of the 99%
- For example, gasoline mileage is not reduced by using the car’s heater in the winter – as it is in hybrids
Bloomberg notes that hybrids fell from 2.4 to 2.2 percent of total car sales in 2011 over 2010.
During that same year, two would-be hybrid manufacturers went bankrupt while waiting for approval on their Department of Energy loans.
While no car company’s bankruptcy should be celebrated, the situation illustrates, again; that our economy functions best when government proposes and private capital disposes –
- The government succeeds when it establish ambitious goals of fuel economy for the common good -
- Environmental conservation
- Health and safety
- National Security.
- The market place succeeds when manufacturers embrace those standards and still produce products that earn an honest profit.
- Profit attracts private capital –
In our convoluted tax system both the profit returned to private capital investors and increased car company profits are taxed – increasing tax revenues. But that’s a subject for another day —
In the meantime, here’s $20B in found money we can apply straight to the bottom line!!!