Hybrid Liberalism

Here's an article from the Weekly Standard on another one of those wonderful tax breaks to the rich.

Being the true economist that I am, then there's really no good that can come from this tax break. Ignoring (for the moment) of the regressive income redistribution that comes from the data supplied in the article, the article misses the big picture. The idea that we need to subsidize the consumption of hybrid vehicles is a just another distortion caused by special interest groups. As explained in the article, former limosine liberals are now becoming hybrid liberals. They would buy these vehicles because it's "the right thing to do" not because it's economically sound for them to do so.

What the tax break does is that it takes the price higher than it should be because the subsidy drives up the price of the car. Of course, whether people would be actually driving hybrids if there was no subsidy is a different question (with an answer of yes, most likely). There are already governmental standards in place for fuel efficiency and especially in California, requirements to produce and sell hybrid cars to the public.

The article talks about how GM is regretting its decision not to enter the hybrid market, despite the fact that it is a proven money pit. It's because of the environmentalist pressure on auto manufacturers to be more (environmentally friendly). Now, wouldn't it be more environmentally friendly just to build cars that are more efficient for all product lines? The problem with that is that the market (ie regular people), has already signaled that people are willing to sacrifice efficiency for size, power and capability. That's why so many manufacturers build SUV's. There's high demand for them and it is profitable for auto manufacturers to make them.

The one thing that the article doesn't mention, but I think is important, is that the tax doesn't make a distinction between owning a car and actually driving it. For people mentioned in the article that make on average $130,000 a year, I'm willing to bet that they own more than one car. So the tax says that you can take the subsidy if purchase a hybrid, but doesn't make any distinction about actually using that car. It is just a ploy to get people to purchase cars that they wouldn't buy otherwise (because the price of gasoline is still cheaper today in real terms than it was back in the oil crisis of the 1970's.)

So I guess the moral of the story is that hybrids, which I'll admit I looked at when at an auto show this past weekend, still have a long way to go before they become an economically sound purchase. But that won't stop the government from trying to intervene in the market and throw $330 million to people who probably don't need it.