• Oct 13, 2010
Michigan Senator Carl Levin has been called the auto industry's best friend by detractors who say he's worked hard to obtain that title by defending the status quo. At the 2010 Business of Plugging In conference in downtown Detroit today, though, he made some comments that might put a stop to such name-calling. Levin said he wants to end what he sees as the small, incremental approach to cleaner vehicles the U.S. government is using today in favor of a huge and comprehensive program. "Our goal should be nothing less than making electric vehicles affordable and attractive to every American family," he said.

Levin talked about seriously overhauling how the U.S. government promotes cleaner vehicles. He said there are three policy drivers pushing us in this direction today: climate change (which he said "is real, it is urgent and we either deal with it now or our children and grandchildren will have to deal with it later when the remedies will be much more difficult, much more expensive and much less effective."), national security (i.e., oil independence) and the desire for a thriving manufacturing sector (i.e., jobs).

What has held the U.S. back from dealing with these issues in a coordinated way? Levin cited a fear of government support of manufacturing because that was considered industrial policy, what he termed "the kiss of death":
While our government refused to partner actively with American manufacturers, our competitors were establishing partnerships and making investments to position their manufacturers for the future. The second impediment was the ability of oil-exporting nations to play like a yo-yo.
America made progress on fuel efficiency gains in the 1970s, Levin said, but OPEC knew how to set us back:
Oil ministers of those nations made it clear they would keep the price of oil at a low enough level so that alternative energy sources would not make economic sense and that distracted us from the fact that ending out dependence on imported oil in our long-term economic interest, beyond the need for environmental and security reasons.
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Levin praised the 2009 American Recovery and Reinvestment Act (the "stimulus bill") for the $2 billion (at least) it gave to advanced battery companies in the U.S. and said that the country is ready to focus on the long term:
I believe we have begun to clear our eyes. We are no longer shackled by an ideological aversion to industrial policy. The administration understands that our manufacturers are not competing with foreign companies but with foreign countries that support their manufacturers. And our long overdue understanding of what our companies are up against in the global economy is demonstrated in the area of electric vehicles.
Up to this point in the speech, Levin hadn't really said anything that would be too controversial in Detroit or other Democratic-leaning areas. Then came this (remember, Levin used to warn against higher CAFE standards):
CAFE forces auto manufacturers to focus on incremental improvements rather than dramatic leaps forward. CAFE is a rowboat, when what we need is a high-tech whitewater raft, something to carry us with confidence towards that ultimate goal: affordable alternatives to the internal combustion engine.
Levin proposed getting rid of CAFE, and more:
We need to rethink the whole regulatory approach to achieving advanced technology vehicles. We should explore the possibility of requiring, by a certain time, perhaps 10 or 15 years down the road, that the entirety of certain classes of vehicles be made up of plug-in hybrids, all-electric vehicles, fuel cell vehicles or other alternatives to gasoline. We would need to include in any such proposal a strong government partnership, investing in research and development and investing in the infrastructure necessary to support these vehicles. I know that the idea of such a mandate would be controversial. Thinking it through and avoiding unintended consequences would be difficult, but the incremental gains of our current approach are achieved at great cost in terms of resources and policy struggles. We should at least consider removing those high costs – along with the EPA, NHTSA and the California regulatory regimes that have produced those costs – and putting in their place a longer-term approach that gets us to a better result.
Controversial? Most certainly. Effective? Could be, if done right. How would you do it?

[Image: Kris Connor/Getty Images]


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  • 40 Comments
      • 4 Years Ago
      Using economic analysis it is not hard to show that CAFE style performance regulations are a very very distortionary and ineffective way of decreasing externalities. In few words, the CAFE standard is equivalent to taxing fuel use while subsidizing more driving and the production of more vehicles. Tons of papers in economics literature showing this.

      A straight fuel tax is the most efficient, but happens to be the most politically toxic.
        • 4 Years Ago
        Wrong.

        Politics and Economics are inexorably linked. You cannot divorce the two.

        That leads to assertions that Taxes are efficient, when by definition, they are inefficient uses of capital.

        It also leads to political viewpoints that subject some people under the will of other people, without their consent.

        You can talk all the Economic theory you want... but at the end of the day, it has political ramifications, because it has REAL WORLD CONSEQUENCES.

        Not to mention the sheer economic consequences of the government seizing more and more legally created wealth, essentially confiscating value of people's time, talent and effort, which is the bedrock on which the true value of money is a representative symbol. The government does not earn. The government is not motivated to become efficient to maximize beneficial effect.

        The government only seizes for their use. A particular few uses, the enumerated powers, are legitimate. Many of the government's current uses are not enumerated constitutional powers, and are actually hurting the people being governed, and being taxed.

        Again, YOU CANNOT DIVORCE ECONOMICS FROM POLITICS.
        • 4 Years Ago
        However, it has been a loud conservative narrative that has supplanted common sense and economics when people make up their mind on these issues. When gas prices were increased for the last time in California, people waited in line for hours at gas stations before the hike to squeeze 40-50 cents more. This is utterly irrational and is the product of this anti-tax narrative you seem all too familiar with.
        • 4 Years Ago
        There is a reason that onerous taxation is politically toxic.

        It is corrosive to the people being taxed, and their economic activity, which is the foundation of our economic system, and the source of weath generation. The people who are supposed to be the ultimate political authority in this country, with our representatives governing us by our consent.

        Of the people, by the people, and for the people... remember?

        Not of the elite, by the corrupt, and for the power-hungry.
        • 4 Years Ago
        @BoxerFanatic

        I think you are confusing ideology with economics, which is an all to common pit-fall in today's discourse.

        Taxes are definitely not corrosive to society. Government has to provide a certain set of services (google: public goods) like it or not and it needs revenue to be able to do that. The alternative to this is not pretty; these are good taxes. We can't expect free lunches.

        Another set of taxes aims at internalizing common costs... pollution, national security etc. There is a clear need for taxes here because there ARE NO MARKETS to regulate, through price signals, the environment. Economics tells us a lot about how this pigovian taxes (google that too) should be structured to reduce market distortions (i.e. deadweight).

        This is really not a matter for philosophizing and opining without an understanding of what is going. This is especially not a matter to consult the constitution and even less any other ideology.
      • 4 Years Ago
      @ Gardiner Westbound,

      It seems Sen. Levin's entire point is to ween people off as much oil as possible as quickly as possible. What does Canadian oil have anything to do with what was being said?

      Anyway, we debate government intervention and yadda yadda about socialism and (more yadda yadda) about how government shouldn't intervene blah blah blah. I don't particularly agree with government intervention unless it's absolutely necessary to keep an industry from complete collapse and I honestly dunno much about foreign politics (I hope someone else chimes in with respectful, intelligent thoughts). But hasn't China's industrial growth been spurred dramatically in the past several years by government intervention and mandates? I recall reading fears of intellectual property stealing because China forces foreign automakers to partner with Chinese manufacturers if said foreign makes want to build in China. Though I don't really agree with practically anything the Chinese government does, supporting its own infrastructure is incrementally strengthening not just its own economies and businesses, but also its people. Foreign companies can't just come in and build in China anymore because the Chinese have demanded higher labor rates. And isn't the Chinese government wanting the larger Chinese automakers to purchase the very many smaller automakers to strengthen its automotive force?

      There's a lot more to my thoughts, but I figured here was a good place to stop. I'd enjoy reading others thoughts though.

      -R
      • 4 Years Ago
      He's better friends with the UAW than he is with automakers.
      • 4 Years Ago
      @sebasguerro

      I just explained why you cannot count on the elasticity of demand for energy saving devices. The government can't tax money away from people and then expect them to buy new vehicles; especially when the tax has just made their old vehicle worthless. Society's only options would be to open the taps on consumer credit (umm.....not such a good idea right now) or to announce that the taxes will be imposed at a specific time in the future. Postponing the introduction of taxes in order to increase demand for energy saving devices is similar to CAFE standards, but demand manipulation (Pig tax) is more clumsy and far more dangerous.

      I'm not sure you understand how the automobile industry operates in the United States either. You are correct that American consumers can transition to smaller, cheaper cars in the event of sumptuous taxes on gasoline. Unfortunately, this is the absolute last thing the car manufacturers want. Small vehicles have minute profit margins b/c they are not significantly cheaper to build or design (crash testing), and as labor becomes a larger determinant of vehicle cost, outsourcing and mechanization start to rear their ugly heads.

      Japanese K-cars would solve our fuel-efficiency problems almost immediately; instead, the US government wants to gamble billions of dollars on electric vehicles. Why? The answer is painfully obvious. Western manufacturers can't compete in the world of low-cost, low-margin vehicles. The gov would rather offer massive subsidies to help American families purchase $40,000 Chevy Volts.

      The government will not transition the US economy to Japanese K-cars, and suggesting K-cars as a solution merely underlines that you do not comprehend the forces at play. The US government is attempting to subsidize guiltless extravagance (hybrids and electrics) on behalf of the automakers and auto unions. To pretend that they are trying to do something intelligent is to misjudge them.
        • 4 Years Ago
        May I ask, with all respect, where do you get your economics from?

        What books have you read recently that explain that perspective? Journal Articles? Have you conducted your own econometric studies of demand?
      • 4 Years Ago
      @sebasguerro

      Everything you've said is true based upon one assumption--that CO2 is a harmful pollutant.

      CO2 is in fact "plant oxygen" so to speak. It's less that 1% of all greenhouse gasses, and only 5% of CO2 is produced by mankind. We have study after study after study to suggest that the pollution problems we face are actually a result of the damaged natural sequestration system. That's why we started Arbor Day, and paper recycling. We also stopped particulate matter to eliminate acid rain, and we stopped oceanic dumping.

      This is not about regulating CO2 b/c everyone is aware that we will not reduce atmospheric CO2. This is about classifying "plant oxygen" as a harmful pollutant in order to protect domestic manufacturing companies.You can't throw around words like Pigovian until you can produce some negative externalities and proof that a Pigovian tax will remedy the problems. As far as the world of science is concerned, the Pigovian tax will accomplish nothing which proves a CO2 tax isn't about remedying negative externalities at all.

      We are weening ourselves off of oil to improve our balance of trade. During this exercise, we have the opportunity to screw the consumer (under the pretense that our balance of trade is the consumer's fault) and exalt inefficient manufacturing (under the pretense that inefficient manufacturing is good for the proletariat).

      Goody. I can't wait to see how this turns out in the long run.
      • 4 Years Ago
      Just jack the gas tax up. This is the most simple, fair and equitable way to reduce gas consumption.
        • 4 Years Ago
        No one will raise gas taxes, it's a death sentence to any politician.
        • 4 Years Ago
        @ BoxerFanatic:

        Just a thought - if you're concerned about sending money to the US Government (which theoretically could be used to pay down the debt you mentioned, BTW), then you should be just as concerned that a good chunk of our money is going overseas to other countries (including Canada and Mexico).

        If you follow the logic that jobs follow the money, then we're doing just as bad of a job now sending our money overseas as we would paying the Government.

        Otherwise, all our jobs will disappear as there would be no money left to pay anyone - that money would have gone over to the Middle East and out our tailpipes.
        • 4 Years Ago
        IT IS A DEATH SENTENCE TO THE US ECONOMY.

        If you have extra money to send to the government, by all means, volunteer it.

        Regulations, devaluation of the dollar, and *INSANE* levels of federal debt, causing huge tax burdens and future liability are breaking the american economy, and the American middle class is disappearing as a result.

        The Fed is announcing an inflationary stance. My wages haven't budged an inch, due to restrictions, in three years now. I lose buying power every day, as my wages stagnate, other jobs are scarce to non-existent, and expenses and costs continue to rise.

        Taxes are set to rise as well, not to mention the hidden costs of government meddling that are baked into the increasing prices of almost every product or service.

        And you think people have the money to spend more on Gasoline, to the government, for some social-engineering PC bullcrap purpose?

        Give your money freely to the government if you want to, but stay the hell out of my ever-thinner wallet.

        And that includes my cars. I am not going to pay more for Carl Levin's idea of a "clean vehicle." If I wanted a frakin' American Yugo, I'd buy one of the sardine cans that are out there already. But I don't.

        If my taxes go up from the thousands I had to pay last year, I won't be able to even afford a new sardine-can-car.
        • 4 Years Ago
        @HECTOR

        You sir are the idiot.

        If you aren't smart enough to accept sound science and the very real consequences of a rising average global temperature, I can see why you're not smart or educated enough to be successful and productive member of society – namely one who doesn't bitch and whine about politicians misusing his taxes and who actually makes enough money (and manages it well enough) to subsist. If you want to complain about politicians and taxes, complain at the polls. Otherwise quit your yapping. There are many people on this planet that would like to pass it on to future generations in a livable state.

        Your lack of intellect and your parasitic existence can very tangibly explain why you're a broke ass who isn't able to afford gas or pay the real price for the pollution of your vehicle.

        Make more money. Or don't reproduce. You are clearly a primitive being.

        I hope your unlucky descendants are able to afford gas masks when their air is unfit to breathe.
        • 4 Years Ago
        "I hope your unlucky descendants are able to afford gas masks when their air is unfit to breathe"

        I do too, because China will be the only country left with money as people like you with politically correct BS ideas and legislation built off of faux science destroys every aspect of the western world and leaves us with bread crumbs.

        get. out. of. my. pocket.

        and btw, you're the only one throwing around names and having a temper tantrum.
      • 4 Years Ago
      @ Hector:

      "If martians were invading Earth and I was asked to pay an additional taxes for an anti martian death ray I would say NO a million times."

      Just a comment - common defense IS enumerated in the Constitution, so it is legal to tax for that.

      And for you to suggest that there should be NO Government (by saying there should be NO taxes) invites anarchy.
      • 4 Years Ago
      Bring our diesel emissions regulations to parity with Europe. And DROP the massive taxes on it.

      Tier2 Bin5 is still 2.5x more stringent than Euro VI, and 6x more stringent than the currently-in-effect Euro V.

      Tier2 Bin5 requires quite a bit of after-treatment for a diesel to be compliant, and all the manufacturers would like nothing better than to simply take the technology that's already prolific in Europe and just use it here in America.

      That alone will reduce the amount of fossil fuels we're using, since diesel takes less to refine, AND the engines that run it are more efficient with it (not to mention reliable long-term).

      Then bring back the Biodiesel subsidy and strengthen it so that we can eventually wean ourselves off the stuff altogether.

      THAT is the solution. Not building a ton of electric cars that weigh down our overburdened coal-and-nuclear-fired power grid.
      • 4 Years Ago
      @ sebasguerrero

      1. I am a tax professional.

      2. I have 2 degrees. One in the economics of government. The second is economics of international trade (highly governmental).

      3. I know oil executives. The real ones who sit in the board rooms at the world's largest oil companies. I eat dinner with them from time to time, and I have dated their daughters.

      I'm knowledgeable and well connected.

      I think you need to explain yourself. I've never met an economist who talks about Pigovian Tax as if it is a legitimate tax system. Pigovian tax is an ideology designed specifically to deal with environmental pollution, and besides a few over-hyped attempts by the UN, global coordination has never been remotely close to being achieved (nevermind enforcement). Pigovian tax is mental masturbation for people who are bored with the process of national pollution legislation via agencies like the EPA.

      The point of a Pigovian tax is to recoup the societal cost of negative externalities (decided by an energy market b/c the real cost is unknown), yet you believe that Pigovian tax should transition people from wasteful cars to new efficient cars. Those two things aren't even remotely the same. Pigou said so himself. Furthermore, is it not painfully obvious that you are using Pigovian taxes as a sumptuary tax? Isn't that what I have been claiming all along? You want to put sumptuary taxes on the middle and middle lower class. That doesn't sound intelligent or sexy; especially if the sumptuary tax makes their current vehicle relatively worthless. A worthless trade-in isn't going to get them closer to a small car.

      I get it. You're a very knowledgeable data rat for a think tank somewhere. That's wonderful. Does it not bother you that no one can assign societal cost of negative externalities? You would rather let the government take a shot in the dark with Pig tax or you'd rather let a pollution exchange (new Wall Street) have a field day with speculation and investment instruments that cannot be regulated by the slugs in Washington DC than to use the simple proven method of increasing mileage standards for passenger vehicles? CAFE isn't a terribly good arrangement, but that doesn't mean its time to have a laugh about Pig taxes.
      • 4 Years Ago
      I'm nowhere near as smart or educated (it would seem) as sebasguerrero or mylexicon. However, I don't believe for a second that CAFE can be considered, by any stretch, to be an efficient way of regulating fuel consumption. THAT'S ultimately what it's about (or should be)--not MPG, per se, but less fuel consumed, period.

      That's good for the environment (climate change or not, burning fuels is toxic, period--the less we do it, the better for everyone) and good for our economy (less domestic cash going overseas, particularly to hostile nations or organizations).

      The gas tax IS highly regressive, perhaps even more regressive than a sales tax (because most states exempt things like food, like my state does, so it makes less regressive). But, it is by far one of the most efficient ways to curtail CONSUMPTION. As others have noted, anecdotally, we know that when we gas went up to $4/gallon nationwide, sales of SUVs dropped dramatically and people actively looked for cars (generally) or smaller CUVs, but not necessarily hybrids.

      We'd all love every vehicle to be fuel-free or to get 100 MPG, but if more vehicles got 35 MPG, that'd be a great improvement. The problem with CAFE is manufacturers have to sell lots of cars most people would not want to meet the requirement--basically the government telling us what to do drive. But, if we raise the gas tax, it becomes OUR choice: if I can't afford the more expensive gas, I buy a more efficient car. If I can afford the gas, I can tell the government F You and just keeping driving my Tahoe (or whatever). But because larger proportions of the population couldn't afford more expensive gas, it would turnover the fleet to more efficient cars more quickly.
      • 4 Years Ago
      @sebasguerro

      We don't need Pigovian taxes b/c they won't work. Simple reasoning makes that clear. Demand for oil and CO2 emissions is relatively inelastic which means people get creamed by taxes in the near term. While the government is robbing them blindly, the government also expects the citizens to save for capital investment in energy-saving cars, appliances, windows, insulation, etc. The government is actually taking away the funding that the middle class and lower middle class need to transition to energy efficient technology. That means that Pigovian taxes actually require very complicated (and always corrupt) negative Pigovian taxes to reimburse people for buying energy saving devices. Oil taxes and CO2 taxes also rape all of the people who are on fixed income (social security retirees).

      To avoid government sadism, the politicians tell people that taxes will go up in ten years so they need to start saving. Okay, how is that any different from a CAFE standard? It's about the same, except Pigovian taxes are ineffective b/c some people are rich enough to avoid efficient living.

      Pigovian taxes don't work b/c most proposals are ideologically still-born. If society's problem is passenger cars that use too much fuel, then alter the efficiency of the vehicle. By increasing the price of oil, you subject the economy to a litany of dangerous unintended consequences (price inflation most of all) and you punish the economically downtrodden. Not to mention, you make a group of government bureaucrats dependent upon a revenue stream that will eventually wither and die (clearly, they won't let the revenue stream die). Pigovian tax is a modern euphemism for a sumptuary tax. It's sad that we have an entire field of economic philosophy dedicated to repackaging a vestige of cultural oppression. What could be more entertaining than watching someone mix Laffer tax theory and Pigovian tax? Amazing. Tax "pricing" and "demand tuning" designed to extract maximum tax revenues by an institution with monopoly pricing power. Laudable. Who do we give the Nobel prize to? Should I send it to you?

      Pigovian taxes are primarily an academic study and an interesting concept. Only a morally-bankrupt economist would ever suggest such a clumsy solution to fix a highly specific problem like vehicle fuel efficiency.
        • 4 Years Ago
        Hybrids and EVs, as Levin is suggesting... ARE more expensive. Directly thousands of dollars more expensive than a car of the same size class by the same manufacturer, with a traditional gasoline engine drivetrain.

        Volt is more expensive than Cruze. Prius is more expensive than Corolla, Leaf is more expensive than Sentra, and even CUV hybrids are more expensive than their non-hybrid variants. Again, exactly what Levin suggests should be mandated.

        And not every family of four or five can drive a small car, nor one that costs significantly more than normal variants of the same vehicle, with hundreds of pounds of lithium batteries aboard.

        Again, REAL WORLD CONSEQUENCES.
        • 4 Years Ago
        It is clear you know less about taxes than about the environment. Read my previous post on the first page.

        While it is true that people are very inelastic with transportation demand, they are very elastic with fuel demand given that you can purchase cheaper more fuel efficient vehicles (vehicle turn-over are very high in the US). If more fuel efficient vehicles were more expensive, then parts of what you said would make at least some sense.

        I recommend you not comment so affirmatively about topics you clearly do not understand or probably have not studied.
      • 4 Years Ago
      Sen. Levin is a fair minded guy. I agree we have to aim higher MPG goals.
        • 4 Years Ago
        A lot of people fail to realize that Raising Gas tax = cost more for everything. i.e. food, products and service that relies on transportation. INFLATION!! So raising gas tax = a NO GO on this alone.

        Since everyone thinks that we spend so much going to war to secure resources for "oil" or that we support/protect other countries with our military, then why not have the government move some of that military spending to fund what is being proposed?

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