A funny thing happened on August 24: I was watching an Orwellian view-screen, which runs short news items and advertisements, in an elevator in the Prospect building on L Street NW, and it said that the Bush administration was tightening fuel-efficiency standards for SUVs. I went to my desk, fired up the old Web browser, scanned the headlines, and saw that it was true -- the White House had, unprompted, decided to make a policy decision that ran contrary to the financial interests of major corporations in order to reduce American gasoline consumption. It was a surprising turn of events.
Except when I read the article more closely, I learned that that's not what happened. Instead, it seems that several of your larger blue states have been considering imposing tighter efficiency standards on SUVs. What the administration did was very slightly tighten the national standard while simultaneously preempting any state-level regulations. In other words, rather than taking on the special interests to reduce fuel consumption, the White House was serving the special interests while pretending to take them on.
On some level, though, it might be for the best. The regulations in question -- the Corporate Average Fuel Economy (CAFE) standards -- though beloved by liberals, aren't a very good idea. The way they work is to set a fuel-efficiency target that each automaker must meet on average throughout its fleet. There's one standard for cars and another, laxer standard, for "light trucks" including SUVs. As liberals like to point out, this SUV loophole doesn't make much sense. And as they're less fond of conceding, they don't make sense in part because the whole approach doesn't make sense.
CAFE rules are, in effect, a tax on gas-guzzlers that's used to subsidize buyers for the purchase of more efficient cars. Companies meet the standards by offering a discount on their more efficient models and by charging higher prices than they otherwise would on less efficient models. Perversely, though, applying tighter rules to cars than to light trucks means that, in effect, CAFE standards are subsidizing the purchase of highly inefficient SUVs, which is the reverse of what we're trying to accomplish. The root of the problem, however, isn't in the ill-designed rules but in the fact that CAFE is trying to tackle the wrong problem.
If you want to reduce gasoline consumption, what you want to do is tax gasoline consumption, not inefficient engines. CAFE is appealing because the tax it imposes is "invisible," and legislators can pretend they're voting to encourage the production of more efficient cars. In the real world, however, it doesn't work that way, and someone needs to pay the piper either way. A much better way of reducing consumption would just be to tax it straightforwardly with higher gasoline taxes. The revenue could then be used for a progressive tax cut. Most crudely, the government could simply add up all the revenue from the higher tax, divide by the American population, and then mail a check to everyone at the end of the year, giving each family that share. That would be a net transfer of wealth away from families that use more gas than average to families that use less -- a clear and simple way of creating an incentive for people to use less fuel.
The CAFE approach, by contrast, only makes sense on the theory that everybody drives the same amount. If that were true, the efficiency of your car would be the sole determinant of consumption, and inefficiency would be a reasonable thing to tax. But it obviously isn't true. Some people commute five miles to work; others commute 50. Some families share one automobile; others have one for each parent and one for each teenager. To put it in crude, self-interested terms, some Americans -- like, say, me -- don't own a car at all. We're the true heroes of energy efficiency, and CAFE rules provide us with no benefits whatsoever. But if you want to subsidize energy conservation, it makes no sense to leave out people who conserve through not driving or carpooling.
Scrapping CAFE in favor of higher gas taxes would also resolve the SUV issue straightforwardly by treating all vehicles equally. What's more, it would stop the scapegoating of SUV owners and properly refocus the debate on the nub of the issue: people who consume a lot of fuel. At the end of the day, there's no real reason why someone who doesn't drive very much shouldn't own a gas-guzzler. More efficient engines are more expensive than less efficient ones. If you only drive your SUV once a week, it makes perfect sense not to invest much in efficiency. And there's no reason for national policy to be aimed at punishing those people -- they consume far less fuel overall than frequent drivers of more efficient cars.
The trouble is that liberals are failing to be clear about what it is we're trying to accomplish. Environmentalists would like us to use less oil to keep the air cleaner and help fight global warming. Foreign-policy people see geopolitical benefits in reduced consumption. But pollsters see a public infuriated by high gas prices. Thus, it's convenient to politicians to pretend they have ideas that solve all three problems simultaneously, and more efficient cars seem like they might fit the bill. But the first two goals -- eminently reasonable ones -- are actually inconsistent with the third. Saving the environment and reducing our exposure to Middle Eastern instability require higher prices, through higher taxes, not wishful thinking.
Matthew Yglesias is a Prospect staff writer.
