Wednesday, January 28, 2009

Detroit Takes One (More) for the Team

Obama offers another costly, destructive gesture.

Why kick the auto industry when it's down?

Because it's down.

[Business World] Veer

President Obama rolled out his first big gesture on energy and the environment this week. It consisted of a cunning, even brutal judgment -- we're tempted to liken it to the besieged submarine commander in the movies who fills his torpedo tubes with his dead comrades and jettisons them overboard to fool the enemy destroyer circling overhead.

In this case, the circling destroyer is Mr. Obama's green constituency, hungry for a gesture on climate change and energy independence. The dead crewmen are the Detroit auto makers. They've already been blown to pieces by last year's runup in gas prices and then the credit meltdown. They'll hardly notice an additional blow in Mr. Obama's EPA likely granting a California request to regulate vehicular emissions of carbon dioxide, which means effectively stepped-up fuel mileage mandates stiffer than the federal government's.

Never mind the absurdity of the issue. California has received waivers to set its own Clean Air Act rules since the very beginning because California suffered unique air pollution problems. California does not suffer unique global warming problems. In no way is the state uniquely affected by the climate risks posed by tailpipe emissions of carbon dioxide. California politicians were acting purely in a grandstanding capacity to seek such a waiver. Mr. Obama would be acting from purely a least-cost political calculation in granting it.

On Monday, Mr. Obama also ran out a plan for newly hiked-up federal mileage standards, giving the greenies one bite of the apple and making it sound like two.

How the Detroit auto industry set itself up to become a safe political target for such costly, destructive gestures is a subject we've covered before. But let us grant the political system a certain adaptive wisdom. The car industry must die a thousand deaths so the rest of the economy may live -- especially since we've already committed to using taxpayer dollars to make it up to Detroit and buy the acquiescence of its lobbyists.

What must Mr. Obama's incoming regulatory czar, Cass Sunstein, an expert on cost-benefit analysis, make of this regulatory excursion? His accession has hardly delighted the greenies, not least because of papers he's written suggesting the U.S. has relatively little to fear from climate change compared to other nations, as well as entertaining the possibility that the costs of fighting global warming might be greater than the benefits.

Is there room in Prof. Sunstein's cost-benefit models for a policy that makes no sense on its own terms, but is meant to stave off something worse?

On Monday, like every politician since Nixon (practically), Mr. Obama invoked "every president since Nixon" on the subject of the need urgently to pursue energy independence. He actually channels John Kerry's 2004 evasion, however, promising to reduce America's oil consumption decades hence by a tiddly two million barrels a day or "nearly the amount we import from the Persian Gulf."

Big whoop. We and the rest of the world would end up more dependent on Middle East oil, not less so. Low-cost oil is consumed before high-cost oil. The lowest-cost production is in the Mideast, so any reduction in our consumption would result in non-Mideast oil being squeezed out of the market.

But suppose we stopped burning oil altogether. Would the U.S. be any less alarmed if Osama bin Laden took over Saudi Arabia? Would we become indifferent to Iran's nukes? Would we be any less committed to Israel's survival?

The idea that oil drives our foreign policy is a Hollywoodization that Mr. Obama will find quickly disappears in the situation room.

FDR ran on balanced budgets and austerity, the political correctnesses of his time. Mr. Obama is making mock delivery on various energy and environmental promises that likewise will end up having nothing -- zilch, nada -- to do with the real agenda of his presidency.

One final irony is that the global depression Mr. Obama will spend his administration fighting likely will produce decreases in CO2 output and energy consumption beyond the wildest dreams of the interns who drew up his campaign promises. Mr. Obama will devoutly wish it wasn't so.

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