Obama gave a good speech yesterday, outlining his plan to save Detroit from itself. He would basically force the Big Three (really the Shrinking Two) to invest in fuel efficient vehicles that run on alternative fuels*:
Obama proposed that the government pay for 10 percent of domestic automakers’ health-care costs for retired workers through 2017 if the firms plow half the savings into equipment for making more efficient cars and trucks. Obama’s campaign estimates that this would cost taxpayers roughly $7 billion over the next 10 years.
That said, I’d feel better about Obama’s plans if he wasn’t a leading supporter of the tariff on Brazilian ethanol derived from sugar. (There is a tariff of fifty-four cents per gallon on sugar-based ethanol from foreign sources.) Instead, Obama supports nurturing a “home grown ethanol industry,” which means massive subsidies for corn farmers. While that sounds nice in the abstract, it’s up against the brute facts of botany: ethanol distilled from sugarcane is much cheaper to produce and generates far more energy per unit of input–about eight times more, according to most estimates–than corn. And because we also impose tariffs on imported sugar – the sugar lobby is almost as powerful as the corn lobby – it’s not economical to develop a domestic ethanol industry based on sugar cane. It’s as if Congress has decided that supporting the corn farmers with massive agricultural subsidies is more important than 1) developing alternative fuels that are better for the environment and help prevent global warming 2) wean us off our dependence on foreign oil and 3) help support development in poor countries that grow sugar.
I appreciate Obama’s tough talk to Detroit, but I wish he was equally willing to talk tough to the corn farmers of Illinois.
*The one part of his plan that’s stupid is the part that will extend the tax subsidy for hybrid vehicles beyond the current 60,000 car cap. This is really an expensive tax break for the upper class. I see no reason to give $3000 of public money to the owner of Lexus SUV hybrid. As I’ve argued before, diesel engines are a much more cost-effective means of reducing emissions and increasing fuel-efficiency than hybrid engines, at least until battery technology improves.