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Do Higher MPGs Mean Increased Costs, Fewer Jobs?

with Louis Liss

The Obama administration recently announced that it intends to ratchet up automobile fuel economy and emissions standards in the next 14 years to levels currently reserved for hybrids. But is this proposal a bridge too far or just what the economy needs?

A Washington Post article from a few days ago outlines the debate, with several detractors worried that it would raise costs too much and take away jobs. On the flipside, the Infrastructurist’s Eric Jaffe quotes some interesting rebuttals from both the United Auto Workers and GM.

With innovations like the only plant in the United States to produce the subcompact Chevy Sonic, GM and organized labor seem to be putting their money where their mouths are. GM’s new plant will also be their greenest, adding jobs in the country’s growing clean economy. The Sonic will be manufactured cheaply and sold profitably to compete with subcompacts produced abroad, like the popular Honda Fit; cars in this class offer extremely low prices and high gas mileage. Admittedly, GM will be cutting costs by offering comparatively low wages, but the factory could become a model for others across the country.

And what about the MSRP? While the Post and Infrastructurist both touch on issues of added up-front cost to the consumer, there is still a large piece of the conversation missing about how this sort of standard can be made to work for the end user--not just the automakers, the government, and the task of climate change.

The high-tech consumer electronics sector for provides a helpful quick comparison. As a rule, the speeds and capacities of our computers, phones, and entertainment devices have grown exponentially over an extremely short time; the hardware in today’s one-plus-gigahertz, dual core, handheld smartphones makes the insides of the desktop computers of ten years ago look like junk. Better yet, the tech companies strive to keep up this incredible pace for the benefit of the end-user experience. In a recent blog post from the Google team, they describe a redesign of the ubiquitous search engine’s home page as part of their philosophy to ultimately guide consumers to what they want. Once firms discover the next great innovation, the crucial next step is to make it affordable for everyone. Why can’t automakers do the same?

We can support these efforts through public and private efforts to defray any immediate purchase premiums. Ultimately, however, there is no doubt that the car companies can use some of that good old “American ingenuity” and, for the sake of the consumer, make cars both cheaper and cleaner to run. Industry leaders in favor of higher standards reason that harder work makes for more jobs and, as GM has responded, carmakers should be up for the challenge.