Being busy with lots of other stuff last year, I never really focused on new Sen. Barack Obama. I did
notice sort of peripherally that the Democrats seemed to be really excited about him.
I can sort of see why, after a colleague today shared with me this excerpt from a story in The Washington Post:
Last month, Sen. Barack Obama (D-Ill.) offered a proposal to raise
federal fuel-economy standards in cars and trucks by 3 percent a year
in exchange for the federal government picking up the costs of retiree
health care. Detroit automakers say the costs are a crippling burden in
competition with foreign rivals.
Talk about killing two birds — increasing fuel economy and lowering the price of automobiles. Of courses, that assumes that automakers would pass on the savings to us (estimated at $1,500 per vehicle), which I realize is quite an assumption. But it could happen.
I have to say, though, that while solving automakers’ health care cost problem is nice and all, how about the rest of us? I don’t know what the solution is, but I agree with Nicholas Kristof when he writes in a column that will appear on tomorrow’s page that something a tad more comprehensive is called for. (I’ll go back into this in the morning and link to it.)
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Obama’s proposition is very interesting and horribly wrong. Since the 1950’s the American auto companies have engaged in a free for all give-a-way with the UAW. Now, due to poor design innovation, mediocre quality, and stiff competition the party is about over. So along comes another liberal politician to proclaim that Uncle Sam is there and has lots of money printing presses to take care of it all. I sure hope not. Take my word for it but there wasn’t a benefit the auto workers didnt agree to with the unions: 6 weeks vacation, unlimited medical, daycare, legal coverage, dental, and more while paying out between $25 to $75 per hour to paint cars and put on headlights. We, the taxpayers, should NOT be saddled with the hangover from this party. The Japanese hybrids and the free market within this country will resolve the gas guzzler problems. The feds need to stay out of the free market.
Brad,
I favor national health insurance, yet two core issues need to be addressed before we start paying for services:
1. We need ubiquitous, well-designed insurance policy and procedure. If you talk to people who actually file insurance claims for doctors and hospitals, you’ll find that they daily live through a bureaucratic nightmare. It’s hard to believe, but today we’ve got a myriad of insurance companies that all have different policy and procedure with different payable amounts and different kinds of coding. It takes literally a small army of people to sort, code, deny, and pay claims for a typical hospital. The system has a million different exceptions, flexibilities, and leeways for the denial of claims. These denied claims end up being resubmitted and going through the system again and again. I don’t know the actual administrative percent cost per procedure, but it has to be enormous.
2. Based on my experience, hospitals need to develop better processes for efficient patient treatment. I mean that hospitals need to focus on creating low variation, high productivity systems by creating better divisions of labor. Hospitals have all kinds of bottlenecks and inefficiencies. We certainly have the knowledge to do this today-at least in other industries we do. For example, the manufacturing industry has solved many of these same kinds of process flow problems.
Undoubtedly, Obama is an exciting orator as is John Edwards. It is a joy to listen to these rhetorically gifted men. During John Edwards’ rally on his second visit to Columbia, as he approached the conclusion of his remarks, I remember shouting from the crowd, “One America”, whereupon his gave his Two Americas speech. The people loved it. My wife and kid had a great time at the rally as did I. Politics can be fun. One aspect of Edwards’ demeanor that I wish that every Southern Democratic politician would emulate is Edwards’ positive spirit. I may not agree with Edwards on every issue (I’m fairly far to the left of Edwards), but you can bet that I’m going to vote for him given the opportunity, not based on his rhetorical skill alone, but based upon his keen insight into the problems that common people face. Edwards is the best at articulating the way that I feel, yet he proposes reasonable solutions given political reality.
Isn’t this the kind of corporate welfare that democrats oppose? And while it is great that it will decrease the price of a car, that only means that the cost is getting rolled into your tax bills. Fuel effeciency standards are not worth the enormous cost to taxpayers that Obama is proposing.
David and Nathan agree? So do I.
There’s a whole lotta moral hazard going on here.
Illinois has assembly plants for GM, Ford, and Chrysler; it has oodles of suppliers for these guys within its borders too. Obama has a big incentive to help his state.
Here are the numbers — year and MPG target — that the manufacturers would have to sign up too under the 3% deal:
The manufacturers would sign up in a skinny minute knowing that they could meet the 2010 targets tomorrow. All they have to do is to stop selling any vehicle that gets less than 28 MPG. They’d close plants as required, throwing UAW members out of work but remaining in compliance with the agreement. Well, couldn’t we write in provisions about no closings, etc.? Sure, but if anything the Big Three are masters at bureaucracy –they certainly can’t match Toyota or Honda in engineering expertise. They could effectively stop production of any desired model by jacking the price up to the point where very few were sold, then exercise a “financial contingency” clause in the agreement to shut down. Ford and GM have been planning on reducing production; they’ve resigned themselves to an ever-smaller piece of the automotive sales pie.
Look at the games already underway in federal fuel economy calculations, thanks to the Alternatives Motor Fuels Act of 1988 (AMFA) (see my post here about how to turn a 25 mpg sedan into a 40 mpg fuel miser with a click of the calculator.) These loopholes were expressly designed to assist domestic manufacturers. Obama would be tempted to insert additional provisions that would assist beleaguered Illinois farmers produce corn for ethanol…
Moreover, such an agreement would reward and even encourage the type of stupid behavior that Ford and GM have exhibited. Few of the executives have oil in their blood, most would rather run credit / financing operations or some other clean and easy business. The automotive business is just too icky.
This is another really bad idea, but that’s never stopped legislators before.
Almost all the proponents of abritrary vehicle mileage standards set by law are non-technical people. It is a silly notion of science and math illiterates, who unfortunately comprise the vast majority of America.
Most of the intelligent discussion of these issues occurs among engineers, outside the sight and hearing of those who control the infotainment media and political forums.
Re: Lee’s comment. That may be so, but one of the reasons our energy problems are so acute just now is that W and his boys have forgotten that supply and demand still work. Conservation isn’t just a “private virtue” (pace Dick Cheney), but also a sound application of the principle that if you don’t buy something today, you retain the ability to buy it tomorrow, when you may really need it.
Steve –
In your view is conservation voluntary or mandatory? If voluntary, it’s a virtue; if mandatory, it’s not. That’s the logic Cheney was using.
The gasoline shortage is a short-term problem — prices will decline as the refineries restore capacity. Natural gas is a huge problem and will take more time to fix, thanks to the folks who say “No!”. Thanks to limits on exploration generally and extraction from federal lands in particular, the US now pays more for natgas than any other country does, as this table shows. Building LNG tankers and getting domestic extraction going will take considerable time.
Bush’s energy bill would have kicked in had it been passed when it was proposed three years ago. What folks miss is that the cost to the US Treasury of additional natgas extraction in now prohibited areas is zip — private enterprise is ready, willing, and able to make the investments necessary to bring that gas to market. What’s really scary as the one link above demonstrates and as I mention here, the rising natgas prices are costing high-paying manufacturing jobs in the chemical industry; these jobs will never return. The prices of downline products like the foam used in furniture are rising.
But the biggest kick is in home heating. If one has a newer house, it’s probably so tight that mold is a problem. Owners of older homes who’ve not yet added insulation, storm windows, and caulk have some work to do, but won’t get their money back for a season or three. So most folks are stuck. How do they conserve? Their only option is to turn down the thermostat a bit and hope for a mild winter, but “hope” is not a good plan.
Steve Aiken:
What are you talking about? If you want to feel virtuous by consuming less fuel, do so. You nave no ability to determine the best vehicle and driving practices for anyone else.
My Suburban gets 25 mpg on the highway, 21 fully loaded with 5 passengers and luggage. You can’t even put 5 people in a Honda, with their luggage on top, much less into a hybrid car, but when fully loaded, they will also get about 21 mpg, be a lot less comfortable and a lot less safe.
Who is more socially responsible, the owner of a Cadillac getting 25 mpg (as they do) and driving 10,000 miles a year, or a Corolla driver racking up 40,000 miles at 36 mpg?
Even though 78% of Gulf of Mexico oil production remains shut in as a result of Hurricanes Katrina and Rita, oil prices are headed downwards for a variety of reasons. Generally global demand is slowing: China’s oil consumption was up only 2.5% in 2Q05, US gas consumption is down, airline routes are being eliminated, and sales of gas guzzlers have tanked for the time being.
And prices will further spin down if we head into a recession, so conservationists, take heart!
Liberals and socialists… get back to us about mandatory fuel consumption standards AFTER you have deported the 20,000,000 illegal aliens and removed their demand for our resources.
Lee – I have no desire to tell you what to drive, although if you really need an SUV for long trips, you can rent one. Just don’t constantly whine about gasoline prices and blame environmentalists for everything. The oil companies are awash in bucs and have been for most of this year, but they’d rather bankroll it or try to acquire other companies than explore for more supplies or build refineries. It’s the American way.
Allen, it is you paternalistic liberals who do all the whining, then project your emotions onto your more logical opponents.
Sure, I can rent an SUV, whether you think I “need one” or not. That is not for you to decide, in a free country.
Steve –
The oil companies are awash in bucks and are spending some of them to restore drilling rigs and refineries around the Gulf of Mexico.
As for refineries, the Good Lord abandoned Pat Robertson in his attempt to revive a refinery in California, despite the addition of modern pollution controls. He lost only $75 million, so I guess he was lucky, luckier that these folks:
. As for exploration, you’d have a great point were it not for this post on my blog last week:
The folks who work in the energy industries are every bit as good and well-meaning as you and I are. The companies have mastered a host of technologies and beat each other up every day to get oil to market so that we can prosper. Gasoline is not our problem. As the rigs and refineries come back on line, the prices will come down. The funny stuff in the oil futures market seems to have ceased.
Our really big problem is the natural gas shortage because we still don’t have the infrastructure to import much foreign liquid natural gas, it’s going to take too long to exploit the domestic gas that’s been off limits, and we use a lot for home heating and chemicals. As I noted in an earlier post above, the natural gas shortage is the scary one that will have people up in arms because of the effects: high prices for a range of goods from chemicals to home furnishings, outrageous heating bills this winter, periodic outages at USC and other big natgas users, and so forth. To exacerbate the problem, virtually every new power plant scheduled to come on line in the US is fueled by natural gas. I can’t find the reference right now, but one Midwestern utility wants to build the largest, cleanest coal-fired generating plant the world has ever seen, but it can’t find investors because coal is now bad.
Mike,
The answer is to create a marketing campaign around “The Hydrogen Economy”, and promote clean vehicles,
powered by hydrogen,
which is obtained by lots of electricity,
produced by nuclear-powered steam generators,
in the Nuclear Economy behind the curtain.
Lee –
I wrote about that on my blog here.
There’s still technical issues with the hydrogen conversion, but Toyota has committed to build an affordable ($50K) vehicle by 2015, a slight reduction from today’s price of $1 million.
Oh, and we need to build the nuke power plants.
Mike,
I read your article and it is very good. I agree that we need to build more nuclear power generating plants. I was pointing out, as you did, that the marketing fad of the “Hydrogen Economy” is just an angle of the nuclear industry.
South Carolina should be playing a leadership role in nuclear power, even if we do not have the best sites for construction of power plants, because this state has been at the forefront of research and development, for weapons and commercial.
Unfortunately, hydrogen fuel cell vehicles have become one of the techno-babble items peddled by Dr. Sorensen of USC in his research park scheme. As a research engineer, I would like to see USC improve, but it must be run by scientists, engineers, and technical entrepreneurs, not the usual cast of local marketing hucksters looking for their net ride on the government handout gravy train.
Lee –
What’s that, a compliment? Thank you very much, it means a lot.
I agree with your assessment of the relative value of folks who understand and do the work and those who talk about. The injection of public funds brings out the usual suspects since public officials — no matter how honest and well-motivated they may be –may not have the tools, horse sense, or incentives to watch out for how the funds are allocated and spent. They simply won’t have the yardsticks with which they can measure progress against promises.
That’s a problem in private enterprises too. The business development and marketing folks clearly need objectives and incentives, but they’re hard to craft, and management either has either expectations that are too great or a hands-off attitude that ends up wasting stockholder resources.
The real nut we all have to crack is finding investors to fund the research infrastructure. You need a nuclear power plant with excess capacity and you need the infrastructure that produces and stores the hydrogen. While utilities are warming up to the idea of building nukes, what incentives can you / should you offer so that they have excess capacity that might be valuable down the road for generating hydrogen. Who funds the conversion infrastructure? Do you make it small scale for research purposes or do you roll the dice and plan for a production-grade infrastructure? What can you entice big oil firms to do? They’re aiming to do the retail end and will need to play a part at some point, but what kind of a deal will interest them to invest on the generating side, and how will the nuke plant operator be placated or enticed to partner? Can you get federal funds without starting a stampede for pork in the other states?
There’s a story that the state is telling: SC covers a relatively small geographic area yet has land available for hosting energy research and production facilities, has no indigenous oil or gas resources, offers steady leadership committed to providing the legal and political infrastructure conducive to energy investments, currently acts as landlord for nuclear research and storage facilities, etc. The smart folks are trying to put it all together to find those willing to invest.
“Rolling the dice” is exactly what happens when people play with the taxpayers’ money. They gamble, instead of investing. They take dangerous risks, and they fail.
Do you really want the same folks who cooked up Air South to run research in fuel cells, nanotechnology, and genetic engineering? They are trying. At least, they are acting like they running it. They are trying to get in on the money action.
I do R&D in nanotechnology, genetic engineering, and nuclear processing. There are areas that make money, and a lot that have no real commercial promise. There are private firms, small businesses with fewer than 50 employees, whose research budget in those 3 fields, is excess of $25,000,000 annually. That money comes from their gross profits on last year’s R&D.