Saturday, December 15, 2007

Bashing Auto Companies


This editorial from The Detroit News says it very well:

Friday, December 14, 2007
Energy bill does little more than bash autos

A modified energy bill has had to be stripped by the U.S. Senate of most of the House language that offended various special interests. What's left, however, is legislation that almost exclusively burdens the automobile industry.

If such a version of the legislation makes it to the president, it deserves a veto.

The legislation can't rightly be called an "energy bill," since it does nothing to lay the strategic groundwork for responsible future energy production and use. Instead, it is an anti-automobile bill, pure and simple.

About the only impactful provision that remains in place is the mandate for a 40 percent increase in corporate average fuel economy (CAFE) by 2020, or a fleetwide industry average of 35 miles per gallon.

This demand would cost Detroit's automakers an estimated $80 billion to meet, plus billions for other automakers. That price tag was not seen as too onerous by senators who worked feverishly throughout the day Thursday to spare most other industries any pain.

For example, the bill erases the $21.8 billion in additional taxes the oil and gas industries would have paid under the House version.

A proposed mandate that utilities get 15 percent of their electricity from renewable resources will disappear.

And the bill is being seasoned with hundreds of millions of dollars in pork for coal miners in Kentucky and fishermen in Alaska to buy a few extra votes.

But the automobile industry is being spared nothing. Michigan Sens. Carl Levin and Debbie Stabenow, both Democrats, lobbied to guarantee the automakers would face just one set of regulations.

But as it stands, the bill does not clarify with certainty that the fuel economy levels set by Congress will be the national standard.

Federal court rulings in California and Vermont cases extended the right to set fuel economy levels to the Environmental Protection Agency in the name of curbing tailpipe emissions.

The rulings allow states to petition the EPA for their own CAFE mandates and could ultimately mean automakers would have to produce different vehicles for different regions of the country, or withdraw entirely from certain markets.

The regulatory ambiguity will cost the industry an estimated 5 percent of its sales and add $1,500 to $6,000 to the cost of a vehicle.

The best Levin could do was to gain from the bill's sponsor, Sen. Diane Feinstein, D-Calif., and Commerce Committee Chairman Daniel Inouye, D-Hawaii, statements on the record that their intent is for congressional fuel economy levels to be the national standard, and that regulations by the National Highway Traffic Safety Administration and the Environmental Protection Agency must be consistent.

The statement is better than nothing, and Levin deserves credit for winning it for the industry.

But it is far from the certainty automakers would get from specific language in the legislation that would spare them the unfairness of inconsistent regulations.

Unfortunately, there weren't enough votes for such language.

Along with squeezing automakers, the bill provides some tax incentives for conservation and efficiency, and a commitment to producing ethanol and other alternative fuels.

But the legislation is not by any stretch a strategic national energy policy.

When it hits his desk, President Bush should send it back to Congress with a veto.

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There is always an easy solution to every human problem—neat, plausible, and wrong.
Henry Louis Mencken (1880–1956)
“The Divine Afflatus,” A Mencken Chrestomathy, chapter 25, p. 443 (1949)
... and one could add "not all human problems really are."
It was beautiful and simple, as truly great swindles are.
- O. Henry
... The Government is on course for an embarrassing showdown with the European Union, business groups and environmental charities after refusing to guarantee that billions of pounds of revenue it stands to earn from carbon-permit trading will be spent on combating climate change.
The Independent (UK)

Tracking Interest Rates

Tracking Interest Rates


SEARCH BLOG: FEDERAL RESERVE for full versions... or use the Blog Archive pulldown menu.

February 3, 2006
Go back to 1999-2000 and see what the Fed did. They are following the same pattern for 2005-06. If it ain't broke, the Fed will fix it... and good!
August 29, 2006 The Federal Reserve always acts on old information... and is the only cause of U.S. recessions.
December 5, 2006 Last spring I wrote about what I saw to be a sharp downturn in the economy in the "rustbelt" states, particularly Michigan.
March 28, 2007
The Federal Reserve sees no need to cut interest rates in the light of adverse recent economic data, Ben Bernanke said on Wednesday.
The Fed chairman said ”to date, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation”.

July 21, 2007 My guess is that if there is an interest rate change, a cut is more likely than an increase. The key variables to be watching at this point are real estate prices and the inventory of unsold homes.
August 11, 2007 I suspect that within 6 months the Federal Reserve will be forced to lower interest rates before housing becomes a black hole.
September 11, 2007 It only means that the overall process has flaws guaranteeing it will be slow in responding to changes in the economy... and tend to over-react as a result.
September 18, 2007 I think a 4% rate is really what is needed to turn the economy back on the right course. The rate may not get there, but more cuts will be needed with employment rates down and foreclosure rates up.
October 25, 2007 How long will it be before I will be able to write: "The Federal Reserve lowered its lending rate to 4% in response to the collapse of the U.S. housing market and massive numbers of foreclosures that threaten the banking and mortgage sectors."
"Should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses," he said.

"Uncertainties about the economic outlook are unusually high right now," he said. "These uncertainties require flexible and pragmatic policymaking -- nimble is the adjective I used a few weeks ago."

December 11, 2007 Somehow the Fed misses the obvious.
[Image from:]
December 13, 2007 [from The Christian Science Monitor]
"The odds of a recession are now above 50 percent," says Mark Zandi, chief economist at Moody's "We are right on the edge of a recession in part because of the Fed's reluctance to reduce interest rates more aggressively." [see my comments of September 11]
January 7, 2008 The real problem now is that consumers can't rescue the economy and manufacturing, which is already weakening, will continue to weaken. We've gutted the forces that could avoid a downturn. The question is not whether there will be a recession, but can it be dampened sufficiently so that it is very short.
January 11, 2008 This is death by a thousand cuts.
January 13, 2008 [N.Y. Times]
“The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.
January 17, 2008 A few days ago, Anna Schwartz, nonagenarian economist, implicated the Federal Reserve as the cause of the present lending crisis [from the Telegraph - UK]:
The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. "The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.
January 22, 2008 The cut has become infected and a limb is in danger. Ben Bernanke is panicking and the Fed has its emergency triage team cutting rates... this time by 3/4%. ...

What should the Federal Reserve do now? Step back... and don't be so anxious to raise rates at the first sign of economic improvement.
Individuals and businesses need stability in their financial cost structures so that they can plan effectively and keep their ships afloat. Wildly fluctuating rates... regardless of what the absolute levels are... create problems. Either too much spending or too much fear. It's just not that difficult to comprehend. Why has it been so difficult for the Fed?

About Me

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Michigan, United States
Air Force (SAC) captain 1968-72. Retired after 35 years of business and logistical planning, including running a small business. Two sons with advanced degrees; one with a business and pre-law degree. Beautiful wife who has put up with me for 4 decades. Education: B.A. (Sociology major; minors in philosopy, English literature, and German) M.S. Operations Management (like a mixture of an MBA with logistical planning)