Is raising the Corporate Average Fuel Economy (CAFE) the answer?

CAFE is not the cure for what ails American car makers

Comment: I personally favor raising the CAFE ... but perhaps my opinion does not pass the economics' test. Read the Wall Street Journal view!

Excerpt:

Their [GM, Chrysler and Ford] problems, rather, are due to public perceptions of quality and to legacy labor costs. Pensions and health care cost Detroit an estimated $1,500 or more per vehicle than foreign competitors, and raising CAFE standards won't do anything about that. Mr. Obama generously offered to let the government pick up 10% of the Big Three's health-care tab in exchange for assurances on fuel economy--which means putting taxpayers on the hook for union and management mistakes going back 50 years.

CAFE would only add to that burden on Detroit. The Congressional Budget Office estimates that raising CAFE standards by 3.8 miles per gallon would cost $3.6 billion per year, which would reduce consumption by 10% over 15 years. The National Highway Traffic Safety Administration estimates this would add $3,000 to $5,000 to the price of an American vehicle. The United Auto Workers says it could cost the jobs of 17,000 auto workers and 50,000 auto-parts workers.

What exactly would that get us, in terms of reducing emissions or oil use? Almost nothing. Passenger vehicles account for about 20% of U.S. carbon dioxide emissions; a 10% cut of 20% is just 2%. This would not make a huge difference in domestic oil consumption either, because passenger vehicles account for 40% of U.S. oil demand; so a 10% cut reduces total oil consumption by 4%. These reductions are negligible compared to global emissions and energy demand.

Comment: Perhaps a better solution would be this: Offer a tax credit for the purchase of American-made high MPG cars. It would be graduated: buy a new car that averages 30 mpg on the highway ... get one amount; 35 mpg hwy ... higher amount. That would both spur the purchase of American-made automobiles and discourage the purchase of gas-sucking SUV's (financial disincentive!)