A news service for the people of Michigan from the Mackinac Center for Public Policy

It appears peculiar that a company would demand that government do something that hurts its customers. But that’s what many limited-government policy experts are saying after General Motors CEO Dan Akerson told the Detroit News that he wants to see the federal government raise its gas tax by as much as $1 per gallon. Akerson told the Detroit News that he’d like to see the federal gas tax hiked to get customers to be more receptive to smaller more fuel-efficient vehicles.

According to the Detroit News: “A government-imposed tax hike, Akerson believes, will prompt more people to buy small cars and do more good for the environment than forcing automakers to comply with higher gas-mileage standards.”

Akerson’s comments highlight a conflict of interest between General Motors’ ability to please customers and the federal government, which bailed it out and still owns 26 percent of the company, according to Sam Kazman, general counsel for the Competitive Enterprise Institute.

“It’s crazy to see industry serving government rather than serving the public,” Kazman said. “Carmakers are calling for an increase in the cost of the things that drive their product – gasoline. That suggests there is something really wrong with the world.”

Kazman blames the government’s Corporate Average Fuel Economy (CAFÉ) standards, a policy measured in miles per gallon that car manufacturers must meet for their fleet of cars in any particular year of face civil penalties.

“For most people, lower-priced gasoline is a blessing,” Kazman said. “The notion that car companies, due to government regulations, view low-priced gasoline as a curse is a very disturbing one.”

Shikha Dalmia, senior policy analyst at the Reason Foundation, called Akerson’s comments “troubling.”

“But it makes sense from GM's perspective given the government's CAFE mandate,” Dalmia wrote in an e-mail. “The mandate is forcing the company to expend ever more resources toward developing small, more fuel efficient cars when its customers want large gas guzzling SUVs and pick-up trucks. The gas tax will make these big cars less attractive and help align market demand with the products that the government wants the company to produce. Otherwise, the company has to fritter resources pleasing two contradictory masters: consumers and government bureaucrats.”

Antony Davies, an associate professor of economics at Duquense University, said raising the federal gas tax by a $1 “just doesn’t make sense.”

Davies said gas is still much less expensive for the average American because income has risen faster than the price of gas.

Davies said the average American worked 38 seconds to earn enough money to buy enough gas to drive one mile in 1980. In 2008, the average American only has to work 17 seconds to drive that one mile.

“So this argument that we need to push people to buy fuel efficient cars fails because the price of gas has been getting so cheap, it doesn’t make sense to spend an extra $10,000 to get a battery assisted car,” Davies said.

Davies said proponents of battery-driven cars are not considering that batteries require “rare-earth elements” to operate and 95 percent of the “rare earth elements” come from China.

“If we all switched to electric cars, we’d be more dependent on foreign countries - China,” Davies said. “We’d be more dependent on one country as opposed to a handful of them.”

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See also:

Experts Say CAFE Still Kills Despite Congressional Support

GM Asks for More Tax Incentives

Debate Rages On: Did Uncle Sam's $50 Billion Bailout of GM Work?

Did the Auto Bailout Really Save One Million Jobs?

The Auto Bailout Payback

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