Posted by: bmeverett | August 11, 2011

Citizens and subjects


In the first draft of the Declaration of Independence, Jefferson described other Americans as “fellow-subjects”, then immediately replaced the term with “fellow-citizens.” This critical distinction still resonates in our political discourse. Merriam-Webster’s primary definition of the noun “subject” is “one that is placed under authority or control,” while the primary definition of a “citizen” is “one entitled to the rights and privileges of a freeman.” No wonder Jefferson chose “citizen”. Today, however, we are in serious danger of becoming once again “subjects.”

The medieval concept of government centered on a king who ruled by divine right. The king had obligations to his subjects: to protect and defend them, to provide laws and procedures for resolving disputes and to confer property rights. Only the king and God, however, could judge whether the king was meeting his obligations. Beyond offering a humble petition, subjects had no rights to question the king’s authority, no matter what he did. The king presumably knew best and his subjects should be grateful for whatever they had. Subjects, on the other hand, owed the king absolute loyalty, as well as their lives and all their possessions. Nice system if you were the king.

Citizens in a free society spend their money as they see fit. Some people like to eat out at restaurants. Some like to go to the opera. Some people even like nice cars. Subjects, however, get what the government decides they should have. On July 30, President Obama, surrounded by beaming auto executives, announced yet a new set of fuel economy standards for automobiles. This time the bar is set at 54.5 miles per gallon by 2025. In other words, instead of allowing consumers to decide what type of car they wish to drive, a government-industry partnership will decide for them. I’m sure that the President believes that the peasants will be happier in the long run doing what they are told, even if they don’t like it in the short term. People are children, and the government is their parent.

If you are interested in the President’s rationale for the new fuel standards, read “Driving Efficiency: Cutting Costs for Families at the Pump and Slashing Dependence on Oil” at http://www.whitehouse.gov/sites/default/files/fuel_economy_report.pdf. If you are expecting a thoughtful and persuasive assessment of energy policy, you’ll be disappointed. Instead, you will find a dismal piece of pseudo-analysis that would not receive a passing grade in a high school economics class. Consider the following.

The document claims that consumers will save 12 billion barrels of oil worth $1.7 trillion at $141 per barrel. This number appears to ignore the fact that the advanced vehicles that will produce these fuel savings cost more. Let’s compare, for example, a conventional 2011 Toyota Highlander SUV with its hybrid cousin. This is a good comparison, since the vehicles are essentially identical except for their power train. According to the automotive website Edmunds, you can buy a conventional Highlander for $26,994, very close to its invoice price of $26,457. If you borrow the money to buy the car at 5% over five years, you will pay a total of $30,565 in principal and interest. The conventional Highlander gets an unimpressive 19 miles per gallon. If gasoline costs $3.50 per gallon and you drive 15,000 miles per year, you would spend $13,816 on fuel over five years. If we ignore for the moment the cost of insurance, maintenance, etc., the conventional Highlander would cost you $44,380 over five years.

Now let’s compare with the 2011 Highlander hybrid. Edmunds says you can buy that vehicle for $36,654, which will cost you $41,502 for a five-year loan with interest. The Highlander hybrid gets an estimated 28 miles per gallon, so you would use only 2,679 gallons for a total fuel cost of $9,375 over five years.

According to the White House logic, buying a hybrid Highlander would save you $4,441 ($13,816 minus $9,375) over five years, ignoring the fact that the car itself costs an additional $10,938. Any family that does it economics that way will be bankrupt in a very short period of time. If we choose, we can subsidize the hybrids to make them look cheaper. In the end, however, someone has to pay the full cost, whether it’s the car owner or the taxpayer.

The second problem is that there is no technology currently available that can achieve 54.5 miles per gallon. The EPA claims that electric cars and plug-in hybrids like the Chevrolet Volt and the Nissan Leaf get 85+ mpg, but only because the agency ignores the 55-70% energy losses in electricity generation and transmission. The new fuel economy standards assume technological breakthroughs that are by no means assured. The automotive (and other) industries have recognized for well over a century the value of improved batteries. Today’s battery technologies, such as lithium-ion, are much better than the older lead-acid batteries, but also more expensive. Why does President Obama believe that a few more dollars of government money will achieve a breakthrough that has eluded scientists and entrepreneurs for decades?

The White House report claims that these new fuel economy standards are in the interests of consumers because “According to a recent study, 42% of consumers view fuel economy as an ‘Extremely Important’ purchase decision factor, up from 14% a decade ago.” In other words, the government is simply forcing consumers to buy the cars they really want. This absurd statement demonstrates complete ignorance of how markets work. Consumers of course want efficient vehicles, but they also want vehicles that are safe, comfortable, reliable, high-performing, large enough to meet their needs, stylish, quiet, etc. People are quite capable of choosing cars with the right mix of qualities without government requiring them to do so.

Herein lies the fundamental issue. Citizens make their own choices. Subjects take what their government gives them. Today’s politicians are slowly but inexorably undoing Jefferson’s critical correction to his first draft of the Declaration of Independence. Maybe we should just forget the whole American experiment and go back to being loyal subjects of the British Crown.

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