Miles Per Gallon: How Government Standards Should Work –

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!!!

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