IF ONLY THE UNICORN RIDER WEREN'T SUCH A CONVENTIONAL POL (via Glenn Dryfoos):

Maybe If the Big Three CEOs Had Driven to Washington In Their Companies' Cars (Greg Easterbrook, 11/25/08, ESPN: TMQ)

The fuel efficiency of Detroit products simply must go up, to reduce national dependence on Persian Gulf dictatorships and to cut greenhouse gases. Your columnist is a strong supporter of lower-horsepower, higher-mileage vehicles. But in Detroit's defense, the Corporate Average Fuel Economy standard used by the federal government to enforce mileage rules is dizzyingly complex and riddled with perverse incentives -- among other sins, the system in effect discourages General Motors and Ford from importing into the United States the high-quality, high-mileage models each builds in Europe. For years, Americans traveling in Europe have come back saying, "I rented a [Ford or GM] car in France and I loved it! Why can't I buy that car here?" Consider the Mondeo, a fabulous car Ford builds in Europe -- high-quality, fun to drive, 40 mpg with a smooth-running, clean diesel engine. Why isn't the Mondeo in U.S. showrooms? Unintended consequences of the CAFE rules are part of the reason. Here, my Brookings Institution colleague Robert Crandall summarizes his longtime opposition to CAFE, with links to details of his argument. Brookings is as liberal as the day is long; if even Brookings Institution economists don't like CAFE, there must be a problem.

So is there a grand compromise that gets rid of CAFE but preserves incentives to reduce petroleum waste? The other day on NPR, Fortune columnist Allan Sloan proposed a deceptively simple idea. Gasoline prices have fallen from $4 a gallon to nearly $2 in less than a year. Why not, he supposed, tax gasoline in such a way that it will always cost the equivalent of $4 (the amount rising in sync with inflation), and at the same time abolish CAFE standards. This is the sort of transformational insight Washington needs more of. A higher gasoline tax could be used to retire national debt or to lower Social Security taxes, which matter more to average people than income taxes. If the public knew that gasoline would always cost at least $4 per gallon, super-complicated MPG regulations would no longer be needed, because free-market forces would take care of the rest -- most buyers would choose lower-horsepower higher-mileage cars of their own free will. Those who were willing to pay the piper could purchase whatever kind of vehicle they pleased. Detroit wouldn't have to spend any time or money twisting arms in Washington, and could focus its energies on car-making rather than on regulatory lobbying.

Sloan's idea is fantastic! Of course, it would require a gifted politician to sell the idea to the public; as luck would have it, the most gifted natural politician since Ronald Reagan is about to unpack his bags in the White House. And didn't Barack Obama say something about wanting change? Tax gasoline so the price is always at least $4 a gallon, then eliminate federal mileage regulations. Detroit would be more likely to recover. The Persian Gulf oil sheiks would howl. Either the national debt or Social Security taxes would decline. Federal bureaucracy would shrink. What's not to like?

One failure that can be laid at W's door is that he didn't ask the country to go along with a big idea like this right after 9-11, when the very fact that it is so unpopular would have made everyone feel better about agreeing to do it.

Posted by Orrin Judd at November 25, 2008 2:07 PM