by Sen. Doug Whitsett
The common outcome of government intervention in a free market economy is highlighted in a recent Wall Street Journal commentary. The article, by Henry Payne, points out that the auto industry had a good year in 2012 and expects even better gains this year.
What is troubling is that these recent market improvements happened in spite of, rather than because of, government intervention. Recent government manipulation in the production of alternative sources of energy and electric cars has been ruinous at best.
Economic advisors in the 2007 Bush administration predicted huge advances in the production of cellulosic ethanol. They believed that the distillation of switch-grasses would revolutionize the ethanol industry! Based on those assumptions, the federal government mandated the production of 500 million gallons of plant-cell based cellulosic ethanol in 2012. They targeted production for twenty two billion gallons of annual production in ten years.
The administration poured one billion five hundred million dollars in taxpayer funded grants and subsidies into the fledgling industry. Prodding from Washington encouraged financially troubled General Motors to make large investments in companies that produce ethanol, and to develop flex-fuel vehicles. GM even helped sponsor a national media campaign in 2008 to expand the use of E-85 motor fuels across the country. These fuels contain eighty-five percent of ethanol.
Last year, fewer than eight million gallons of cellulosic based ethanol were produced in the US. The actual amount of cellulosic ethanol distilled was less than two percent of the target production.
The anticipated technical developments in distilling techniques to create ethanol out of plant fiber have not materialized. At this time there appears to be no cost effective technology available. So it appears that the cellulosic ethanol-bust will continue into the foreseeable future.
The Obama administration spent an estimated ten billion dollars in American Recovery and Reinvestment Act taxpayer money on battery development for electric cars. In addition, a seven thousand five hundred dollar federal tax credit was established to encourage families to purchase electric powered vehicles.
The Obama team predicted a million electric cars on the road by 2015. To date there are barely 30,000 electric cars in service. That works out to about three hundred forty thousand taxpayer dollars invested for each electric car on the road. So the next time you pass an electric or flex fuel car you might want to honk and wave. After all, you helped pay for it!
Moreover, federally subsidized auto-battery suppliers like Ener1, A123 Systems and LGChem are either struggling or bankrupt. They have used taxpayer dollars to gear up to produce a product that very few folks seem to want.
Although consumers appear to be avoiding the purchase of electric cars they ARE buying high mileage cars with traditional internal combustion engines. For instance, the twenty thousand dollar Chevy Cruz ECO gets forty two miles per gallon on the highway, using a 1.4 liter turbocharged gas engine. The fast selling Eco Cruz is built on the same platform as the forty thousand dollar battery-powered Chevy Volt that consumers appear reluctant to buy.
The federal government has also mandated EPA regulations that require average fuel mileage at 35.5 miles per gallon in the next three years and 54.5 miles per gallon in the next twelve years. Average fuel mileage today is 23.1 miles per gallon.
Perhaps it would be wise for the federal government to actually ask the public what they want! Even better, our governments should let the market decide.
Fiat owned Chrysler sold about 43,000 of its tiny Fiat 500’s in 2012. During the same time period, the company sold more than 470,000 Jeep SUVs.
Estimates out of Washington D.C. predict the cost of compliance with the fuel mileage mandates to the American auto industry will exceed $135 billion dollars. Of course, that entire amount will be paid by consumers in the form of higher prices for automobiles.
Consumers are already paying untold billions to purchase corn distilled ethanol blended gasoline that actually reduces fuel mileage. The federal mandate that requires ethanol blended fuel is also causing a perennial shortage of corn supply that is costing consumers untold billions in inflated food prices.
These are only a few examples of the disastrous economic outcomes when government attempts to manipulate the free market economy. Markets should be established and regulated by the laws of supply and demand. That equation has successfully driven our economy for centuries. The free market will build or produce whatever is needed if it works, if it is affordable and if the people want it.
It is time for governments to get out of the way and allow our time proven free market economy to work.
Senator Doug Whitsett is the Republican state senator representing Senate District 28 – Klamath Falls