November – December 2019 Commentary

It’s time the Trump administration worked directly with the automotive industry to maintain electric vehicle credits and lower fuel economy standards lest it risk higher prices for new cars and trucks, and more production losses. Right now, automakers are building electric vehicles at a loss to appease “green” politicians, regulators, and environmentalists.
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Illustration by James Yang

Automotive – EV Pipe Dream

It’s time the Trump administration worked directly with the automotive industry to maintain electric vehicle credits and lower fuel economy standards lest it risk higher prices for new cars and trucks, and more production losses. Right now, automakers are building electric vehicles at a loss to appease “green” politicians, regulators, and environmentalists.

The latter group promotes the notion that every consumer should be forced to buy an electric vehicle because such cars emit zero emissions while in use. But the green crowd conveniently disregards the pollution generated at power plants, foundries, mills, and assembly plants — all of which are necessary to produce and propel electric-powered cars and trucks. The trouble is, the marketplace isn’t buying into the utopian dream of zero carbon emissions.

Consider, in July California reached a “voluntary agreement” with Ford Motor Co., Honda, Volkswagen, and BMW to add more electric vehicle credits in the state while lowering the Obama administration’s 54.5 mpg rules to 50 mpg — the industry is at 40 mpg (the Trump administration offers a 37 mpg rule).  To “simplify compliance” among automakers, California doesn’t allow upstream emissions like power generation and vehicle production to be considered when doling out credits.

In other words, the Redwood forests in Southern California could be burned to the ground to charge electric vehicles and the cars would still be considered zero-emission wonders. Granted, electric vehicles, overall, produce less pollution than gas-powered vehicles. But even if everyone were zipping around in zero-emission cars, it would only make a small dent in global CO2 output.

It’s worth listing how we got here. To move what are higher-priced units, Congress passed legislation that provided a $7,500 consumer tax credit on each automaker’s first 200,000 electric cars. After that, the tax credit would quickly shift downward before disappearing altogether and, magically, everyone would be driving around enjoying silent propulsion and less pollution.

That was a decade ago. Today, even with the federal subsidy, EVs account for less than 1 percent of annual sales in the United States. The problem is that technology hasn’t kept pace with the dream that everyone should be driving green, clean machines. Electric vehicle owners still suffer from range anxiety — some batteries may last up to 300 miles on a charge, but recharging them takes six to eight hours — and few battery-recharging stations are in use.

To help muddy the waters of mandated economic inefficiency even further, Congress — including Sens. Debbie Stabenow and Gary Peters — is pushing forward with the “Driving America Forward Act.” To help automakers try to sell what consumers aren’t buying, the act would provide a $7,000 credit for the next 400,000 electric cars an auto-maker sells after they’ve passed the 200,000-unit threshold.

Extending the tax loophole for electric vehicles helps rich people, Californians, companies that already don’t pay taxes, and China, which owns many of the resources required to build and operate these vehicles. — Tom Pyle, President, American Energy Alliance

If a decade of mandates didn’t move the needle, adding more isn’t going to help. Rather than trying to control how EVs are sold, Congress should provide more grants to extend battery range, reduce battery recharging times, and add more charging stations.


Trade Policy – Time for Congress to Act

President Trump’s tax reforms and deregulation efforts have stoked the American economy and led to the lowest unemployment numbers in more than 50 years — the jobless rate fell to 3.5 percent at the end of September. More people are working than ever before, and the economy is running on all cylinders.

But the good times won’t last if Trump doesn’t conclude tariff relief with China and Europe, and if Congressional Democrats continue to push impeachment efforts rather than passing job-generating legislation like the new version of NAFTA, known as the United States, Mexico, and Canada Agreement, or USMCA. According to an April report by the International Trade Commission, the new trade agreement would add $68.2 billion to the U.S. economy and generate 176,000 new jobs. 

Closer to home, the Trump administration estimates the USMCA would create 76,000 automotive jobs within five years of passage, as automakers invest $34 billion in new and renovated plants to meet regional content rules. In turn, Michigan’s agricultural output would benefit from the lower restrictions the USMCA places on dairy exports to Canada.   

Apart from Trump’s trade policies, which have served to slow economic growth, Congressional Democrats should stop hindering the president’s progress. Voters overall want to see positive movement on a number of fronts. Petty attacks on a sitting president aren’t going to get the job done.


Health Care – Eliminate the GPO Cartel

U.S. Congressional leaders under House Speaker Nancy Pelosi have proposed legislation that would place price controls on drugs. To wit, the new set of rules, if enacted, would require the secretary of Health and Human Services to negotiate a “fair” price with drug manufacturers for the most costly 250 patent-protected drug brands.

The price control measure is a recipe for disaster, and should be pulled from the legislation. According to the proposal, a drug maker that refuses to negotiate with the federal government would have to pay a 65 percent excise tax on its annual gross sales. The tax goes up another 10 percent after each subsequent quarter. As it stands, few companies record annual profit margins of 65 percent.

Rather than place price controls on drugs, Congress should look to clean up Group Purchasing Organizations, better known as GPOs. These “middlemen” serve to dictate prices for everything from drugs and bandages to medical equipment and bed linens. The ruse is further compounded by a lack of transparency.

The GPOs don’t allow hospitals and health care service providers to know what drug makers and medical equipment manufacturers charge for their products and services. Rather, they mark everything up at every stop along the supply chain to ensure profits for themselves. Rather than dictate prices, Congress should clean up the GPO cartel. 

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