"Truth or Consequences"

What is missing from the abbreviated version is the proposal to create a price floor -- no gas under $4, propped up by additional monthly-determined taxes. If you like the fedral government interfering in your life and your pocketbook, you probably would endorse the idea. But the effect will be the same as Nixon's price-wage freeze fiasco. Companies will make sure they keep their prices up, regardless of their costs, and when/if oil futures decline to half of what they are now, they will be raking in even more money. That's great if you are a capitalist and believe companies deserve to make a profit. If you favor tight governmental controls, you will lose those once there is no pressure on companies to keep the costs in line with prices. And you still will not have as much money in your pocket. Of coruse, youc an always demand the government subsidize your paycheck to prevent it falling below its establish floor.

 

After reading the rest of the article on the link ... very interesting concept. A $4.00 RETAIL floor would no doubt receive a lot of opposition, but nonetheless, it would be good for the nation. I would like to amend one provision to it though. The price of diesel for commercial trucks would be limited to no more than $3.50 per gallon for the rest of 2008, no more than $3.75 per gallon for the rest of 2009, and no more than $4.00 per gallon for the rest of 2010. After that, Congress can re-evaluate the situation.

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Right now, as I drive by auto dealer lots, here in So.Cal, I see rows and rows of used SUVs sitting on lots, but zero hybrids just sitting there. The market is driving a change in consumer habits on it's own. Even if crude oil sank to $100, the price of gasoline would still be $3.75, and people would still be discouraged from driving SUVs. I think a lot of dealers are going to "lose their shirts" on those rows and rows of SUVs. That is where the real relief will need to come in. Just as the government [controversially] helped the airlines and oil companies, thousands of small auto dealers will be at risk of bankruptcy without some type of assistance with all of those [extinct] SUVs. Does anyone have any suggestions for what the WORLD can do with all of the [extinct] SUVs? Maybe have recycling companies offer $1500 each for them, perhaps? Maybe convert them into pickup trucks for commercial use?

 

And the government bailed out Chrysler when it was mismanaged. All that sets a precedent, but that doesn't mean it is a good precedent. If indeed SUVs are to become extinct and not a guaranteed outcome, then that is the way of business. The current Washington-will-help-us dependency will ultimately harm the nation. Consider if that had been the attitude in the early part of the 20th century when automobiles became more popular. Buggy-whip manufacturers went out of business because the world was changing. No one propped them up with price supports. The owners invariably moved to a different line of work and in many cases undoubtedly prospered. So the "thousands of small auto dealers" will make it -- or they won't.

 

Fraser, I agree with you that during the past several years (under the Bush Administration?), there have been far too many bailouts, and it seems like an abuse of the system. I agree with you that the car dealer bailouts would not be wise. In other circumstances, bailouts are necessary. For example, if all major airlines, collectively said "we have no money, we are closing the doors," in that situation, a bailout would be necessary because an entire, vital industry is at risk. Also, maybe any industry that receives a bailout should become under INTENSE oversight by "outsiders" to make sure they are managing the money wisely. But yes, I agree with you that bailing out individual auto dealers would fit in the category of "overuse/abuse of government bailouts."

Perhaps I originally typed that because our government today has altered our thinking into "anything that is bad for the economy needs to be fixed ... with government assistance." You are right. That is NOT traditional/conventional thinking. Instead it is Bush's "Do anything to keep the economy LOOKING good until my term is completed ... and you can use the nations money. All you have to do is ask. National Debt? Social Security? What's that?" We have become far too accustomed to government bailouts in the past few years, and we need to revert back to traditional/conventional thinking. I wish someone would remind the American people of this.

Perhaps an interesting connection would be how Americans have loaded up on debt and credit cards over the past 7 years, and Bush has been using "America's credit card," and the American people have just seen it as normal. Sad.

How the heck did I get on this tangent ... I thought we were talking about 400mpg Priuses?

 

A legal floor of $4 under gas prices is a moot point. We'll be giggling over this idea as gas prices are crossing $10 in a couple of years. -- But I'm pleasantly surprised to see that Friedman is calling the summer gas-tax holiday a crock!

Rather than a tax adjusted to hold the price to a floor, which might very well just lead oil companies to raise the price and make windfall profits above and beyond those they're already making, as Fraser suggests, we should impose a really hefty fixed gas tax (maybe $1 or $2 per gallon) earmarked specifically for building sustained energy infrastructure. The energy produced by this tax-funded investment would be sold by the government at market prices and the profit used to built additional sustainable energy production.

 

This thread could devolve into a wide-ranging discussion of politics and economics, and I'd rather concentrate on finding the best mods for the Prius and such like. But I feel compelled to comment on this particular point. Actually, government intervention in the marketplace is not exclusive to Bush's administration. It is endemic to the federal government and has been since FDR's well-meaning but uncontrolled effort to combat the Great Depression. It has become traditional thinking to call on federal offices to get anything we want (not what we need). Citation: The Prius is so popular and difficult to get because gasoline prices have risen (environmental concerns are a secondary reason for most buyers; count the posts on the subjects). Consequently, sales of SUVs, as an example, are failing. Should the federal government bail out SUV manufacturers, or is this simply the marketplace at work? Left alone, the market will become what consumers want it to be, and all will be right with our pocketbooks.

 

...or maybe melt them down and use the metal to build a USA assembled Prius

 

I think you are on to something here. I think a bailout is highly unlikely because the amount of loss is unlikely to be as high as in other areas, but more importantly to the Republicans and BushCo, car dealers simply aren't the kind of campaign donors that airlines and oil companies are. Small business will never get a bailout.

However, I could see that if the problem got bad enough -- probably requiring another surge in gas prices ASAP that reduces SUV demand to near zero -- there could be legislation requiring auto manufacturers to reimburse small dealers in exchange for government funds. I think this idea would be excellent if, only if, used in conjunction with increased fuel efficiency standards and a mandated reduction in amount of heavy vehicles that can be produced. Obama has been talking a good game about increasing fuel efficiency, so it's possible that we could see something like this.

 

Why can't those SUV plants be converted to small car plants? If car plants could be converted to tank assembly plant in less than 1 year (70 years ago), why not now for small cars?

No bailouts! Assistance to make the conversion only.

I say, Americans big businesses are becoming fatter and dumber.

 

That is a plan that could work very well ... provided it is carefully monitored, dynamic, and balanced.

 

What is needed is a completely new and radical paradigm shift. We are loosing the technology war on many fronts. Its not just fuel efficiency - gas guzzling versus hybrid. It's sustainable, long term, renewable. We need to force the leaders- Big3 and Govt: Congress, states and local for these industries. We need to do it before it's too late or we will be buying that technology from China and continuing our growth of global debt and our continued dependence from someone else for our consumptive fuel needs. America once was a leader - think WW11. The shift we need is similar to that of John F. Kennedy's on the space race and getting to the moon. We need a new leader with a long term vision. The writing is already on the wall. If we don't step it up we will be buried by China, India.... As of right now we're just up to our throats and only choking. I don't know about you, but I'd rather not fight over declining oil reserves, but demand new technology, new ways of thinking and implemntation for sustainability on all fronts and get out of this hole.

 

Danatt, you make good points. But markets and government are two different entities. We can quibble about the role of government. I believe the federal role is national defense and diplomacy; everything else should be left to state and local governments (per Amendment 10). Others want government to do everything for them, from making them save fuel to giving them money for buying food and TV sets and, yes, Prii through tax credits. Perhaps the reasonable course is somewhere in the middle.

 

I think Friedman is correct in his long range view of the energy situation. But the short range price of oil reflects more speculation (= anticipation) than today's supply and demand. The gamblers are betting that oil will be more expensive in the future, so they are buying paper that they hope to cash in later. That's the major reason why oil is overpriced, as I see it. My view is based on a lot of detailed reporting I've seen.

I don't poo-poo the Clinton-McCain proposal to suspend gas taxes for the summer. Sure it's political--they are vying for the working class vote. But it's the only short range proposal out there by the government, other than some restrictions on domestic purchases of oil futures. Of course, both Clinton and McCain recognize the long range problem and what needs to be done--just as much as Obama does. But maybe they are trying to show they feel the pain for all those working class types who can't afford Priuses.

 

You're right; futures trading tends to be reflected in pump prices. I've dealt with some fuel distributors, and they have always maintained that pump prices are only raised after a delivery. We live four blocks from a conveneince store that frequently raises prices three times a day, and there's anotehr 3 miles away that does the same thing. Both are very busy especially in the mornings with worker-bees buying breakfast and lunch. But not so busy that the tanks empty three times a day.

As for the summer no-tax issue, it's purely a political gambit. The tax cannot be eliminated simply by fiat. Never mind whether companies would continue the higher prices and reap the income. Frankly, I beleive that neither Clinton, Obama nor McCain understand the long-range fuel problems.

 

Yep. They have oil, and they have sun. And they're smarter than we are.

 

The US Government did not "bail out" Chrysler.. they guaranteed the loans (in the event of default) that Chrysler took to finance the turnaround themselves. Congress passed the "Chrysler Corporation Loan Guarantee Act of 1979" (Public Law 96-185) in December 1979. Chrysler paid back the loans.