Posts tagged with: automakers

Blog author: jballor
posted by on Tuesday, January 27, 2009

On the first half of today’s installment of The Diane Rehm Show, Jerry Taylor, a senior fellow at the Cato Institute got off a good line in the midst of a discussion concerning federal regulation of emission standards.

Concerning the performance of the American car manufacturers in comparison to that of foreign automakers, and the moral hazard involved in the various bailouts, Taylor said, “Capitalism without the threat of bankruptcy is like Christianity without the threat of hell. It doesn’t work very well.”

Other guests included Mary Nichols (Chairman of the California Air Resources Board), Phyllis Cuttino (director the Pew Environment Group’s U.S. Global Warming Campaign), and David Shepardson (Washington Bureau Chief for The Detroit News). The discussion focused in large part on the attempts by California to regulate emissions within its own borders more strictly than allowed by the federal EPA.

Arguments that California is “too large” of a state and has too big of an economy to enjoy certain rights doesn’t strike me as very convincing. That’s simply a consequentialist argument: that the nationwide effects of allowing California to do this will be bad, and therefore we shouldn’t recognize the state’s right to handle its own regulation. If it really is an issue of federalism and state’s rights, the issue shouldn’t in the first place be whether or not recognition of a right will presumably have a negative economic impact. There are a lot of assumptions wrapped up in that argument.

No state is an economic island unto itself. The mere fact that the national economy is largely integrated doesn’t by itself mean that states do not have the right to make decisions about how to regulate things within their own borders. Just what is the line between acceptable and unacceptable national economic impact? Adverse feelings to this particular action on the part of California isn’t sufficient to draw lines too hastily. How might this apply to other industries and commodities?

Indeed, we can discuss whether CO2 emissions ought to be regulated at the federal level under the commerce clause, but I don’t think the size of a state should determine what rights it does or does not have. Maybe the consequentialist line of reasoning is inherently wrapped up in the commerce clause (I’m certainly no constitutional expert). But the clause has been stretched so much (e.g. it applies to a farmer consuming what he grows on his own farm) that a little pullback seems warranted, and without the creation of a(n) (inter)national carbon market (a remarkably bad idea) the clause doesn’t seem to me to be directly relevant to emissions.

Blog author: jballor
posted by on Monday, April 28, 2008

One sector of the American public that hasn’t missed out on the government’s purpose for the economic stimulus package is the advertising and marketing industry. Savvy marketers are targeting sales and special offers to the federal rebate checks, which start to go out today.

One sector of the economy especially banking on how people will spend their stimulus rebates is the automobile industry. Here, for instance, is a local car dealer’s ad specifically targeted to the stimulus package:


I’ve seen another major car ad that is currently running nationwide featuring the advice of an economist to a young car buyer. The young buyer is presumably saving a great deal of money on the new car through a special cash back incentive or zero-percent financing or some such other offer. What should the buyer do with all the money he’s saving? Go out and buy something else?

No, says the wise economist. Save it or pay off credit card debt. Of course, the economist doesn’t give the really solid advice, which would be to forgo buying a new car in the first place and taking on all that new debt. Dave Ramsey, a guru of financial stewardship, consistently exposes the lie that financing the purchase of a new car, no matter what the incentives, is a good use of money. As Dave notes, it’s no coincidence that the financing arms of automobile manufacturers are generally among the more profitable aspects of the business.

It’s no surprise that auto sales are often an economic bellwether, since new car payments are typically one of the easiest things to put off in tough times. These are also precisely the kinds of payments that folks facing credit card debt and dwindling savings accounts should be looking to avoid when spending their stimulus rebate.