Sunday, January 25, 2009

Obama the car salesman

The New York Times reports that President Obama will allow 14 states (Why only 14? I haven't figured that out yet.) to enforce their own emissions standards on vehicles.

As a result, a car sold in California may be required to meet different standards than a car sold in Rhode Island. This may require car manufacturers to determine the state in which a car will be sold at the moment of manufacturer, raising assembly costs and diminishing flexibility in liquidating inventory.

Prior to this decision, the US Department of Energy estimated that California's 2002 law (A.B. 1493) will raise the average vehicle price by $1,860 vs. $1,029 without the law. That is, inflation of car prices will increase by 81%.

One can only imagine that a situation in which car manufacturers must sell cars that meeting differing (and potentially mutually exclusive) standards will require manufacturing and distribution complexities that will raise the inflation rate even even further.

If Obama thought tougher standards were such a good idea, why did he create such a cost inefficient and complex system and devolve the power to the states? Does he believe in federalism and conclude the issue doesn't meet the constitutional standard of interstate commerce?

This does not seem to me like an example of the good judgment we are all hoping for. I hope he now doesn't turn his eye to CAFE standards.

1 comment:

  1. Only 14 states have joined this coalition adopting the California emission standard, which is why the ruling only applies to those 14. This is actually nothing new and has been a factor since about 1989. The Bush administration blocked enforcement of the tougher states standards but prior to this there were indeed 2 standards to which manufacturers were required to meet if they wanted to sell their product in all 50 states. This was a shortcut for the new Obama administration to achieve a higher emissions standard. The alternative would have been to raise the bar at the federal level, which would have taken considerable time, hearings, and political capital. The California standard forces all auto manufacturers to achieve a higher standard without any of the above.
    I don't agree with it but that's the thinking behind it. Imagine having differing crash standards for autos or safety requirements for drug approvals? Doesn't make for good policy.