The Obama-Bush Plan

Senator Barack Obama gives a major speech to the Detroit Economic Club, and here is what he comes up with:

Obama Criticizes Automakers on Fuel Economy

Senator Barack Obama of Illinois delivered a stern message to Detroit auto companies on Monday, saying they had done little to lessen the nation’s dependence on foreign oil and needed to improve the fuel efficiency of their vehicles....

Under Mr. Obama’s plan, which he said would save 2.5 million barrels of oil a day, he proposed a 4 percent a year increase in fuel economy standards beginning in 2009, or the equivalent of about one mile per gallon per year.

By 2022, the fuel economy standard for both cars and light trucks would be 40 miles per gallon, according to the plan. The Bush administration has proposed a similar method to raise the fuel economy standard over the next few years.

If Senator Obama is going to adopt policy proposals from the Bush administration, I wish he would find something better than this. Here is a CBO analysis of Corporate Average Fuel Economy standards:

This issue brief focuses on the economic costs of CAFE standards and compares them with the costs of a gasoline tax that would reduce gasoline consumption by the same amount. The Congressional Budget Office (CBO) estimates that a 10 percent reduction in gasoline consumption could be achieved at a lower cost by an increase in the gasoline tax than by an increase in CAFE standards. Furthermore, an increase in the gasoline tax would reduce driving, leading to less traffic congestion and fewer accidents. This analysis stops short of estimating the value of less congestion and fewer accidents and, therefore, does not draw any conclusions about whether an increase in the gasoline tax would be warranted. However, CBO does find that, given current estimates of the value of decreasing dependence on oil and reducing carbon emissions, increasing CAFE standards would not pass a benefit-cost test.