Did Low Gasoline Prices Act Like Low Interest Rates in Causing this Crisis?
The auto industry bailout looks like its going through. That’s nice for all of the UAW pensioners and the millions of jobs that depend upon the auto industry. But to justify all-but nationalizing the auto industry, Pelosi & Co. seem to have adopted a form of supply side liberalism. They’re going to force the car companies to build green cars without managing the demand for them.
We all want to call GM’s management inept. And surely they were. Just read Carol Loomis’s Fortune takedown from two years ago. But in our attempts to blame Wagoner and his posse, we’re forgetting our own culpability in this mess.
The administration never had an energy policy–but we never demanded one, either. Every time the price of gas rose from insanely cheap to ridiculously cheap to almost a fraction of what other countries pay, we got on our hind legs and complained loudly. Congress jumped in too. The Democrats complained about windall profits for the oil companies. Yet for the past several years we’ve shown we could absorb higher energy costs without collapsing the economy.
What if Congress had passed a $1 or $2 gasoline tax a decade ago? Hell, what if they had gotten some of those windfall profits? Think of the tax revenues that could have been squirreled away (enough to pay for the auto bailout or the infrastructure investment, maybe?)
The real benefit would have been a demand driven mandate not to build every car in the low corner of the fuel economy envelope. A gasoline tax would have made it harder for the Escalade and the Suburban, the Tahoe, the Navigator and all of those pickup trucks to become such ubiquitous hits. Toyota and Honda would not have followed the Big Three into the same over-weighted end of the design brief. And Toyota, once god’s gift to the auto industry, would not be suffering along with GM.
Just as the credit bubble was built on Greenspan’s short-sighted desire to keep the economy from feeling any constructive pain, cheap gasoline drove the auto industry off the cliff. They–the American companies and the Japanese–made the cars and trucks we wanted to buy. Cars that we could afford to drive because cheap gasoline made our reckless choices possible.
Until we take some responsibility for the cheap gas, we’re just scapegoating GM.