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.
Please
remember, if we do not stand up for
rural Oregon no one will.
Best
Regards,
Doug
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