Do Bailouts Prove Reagan's Point Re: Government's Economic View?
Ronald Reagan once said:
Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.
Is there no finer example of this concept than our government's hundred year relationship with the American auto industry?
Like all regulatory schemes, Congress's hallowed Corporate Average Fuel Economy rules froze in place a conception of the auto industry as it appeared to the simple minds of Congress in the early 1970s, when three manufacturers dominated the U.S. market, making full lines of vehicles. Today, more than 25 companies sell vehicles here, and the corollary of such diversity, normally, is specialization.
The Big Three, left to their own devices, would surely specialize in those vehicles on which they make money -- i.e., those with hefty price tags and markups relative to their man-hour content. Even at the peak of gas prices, half the vehicles sold in the U.S. were light trucks. In November, amid a collapsed home construction industry and with $4 gasoline fresh in mind, what were the two top sellers? Pickups by Ford and Chevy -- and the Dodge Ram was No. 7. [...]
[UAW chief Ron] Gettelfinger's should be the loudest voice calling for an end to CAFE, an idiotic scheme that has done little to reduce gasoline demand or oil imports. Flexibility to build cars for a profit couldn't help but benefit all of Detroit's stakeholders, including a UAW struggling to preserve an island of high-wage manufacturing (à la Mercedes's German workers) inside what would at least have the possibility of becoming healthy Detroit-based global competitors.
Let's sum up: cars moved; government taxed them; they continued to move; government regulated them; they stopped moving; government subsidized them.
Are Reagan and the Journal right, and the better answer for our auto industry is to remove the regulations that have strangled its progress?