CAFE Standards, Global Warming, and the Wonder of the Automobile

1952 Volkswagen Beetle

The earth is the Lord’s and all that is in it,

the world, and those who live in it;

for he has founded it on the seas,

and established it on the rivers.

Psalm 24:1-2

I am a car guy.

I have always been a car guy.

Cars are part of my earliest memories. The first car I remember in our family was a Renault 4CV. That was followed by a string of Volkswagens, a Volvo 544, a Falcon, and a series of 2-stroke Saabs.

When I need to figure out when something happened, I date it by recalling what car we owned, or what car I was driving or what car someone else was driving or maybe remembering some car I saw on the way.

When I show people the historic photographs of our old church building on Main Street. I always ask, “Do you know the best thing about this picture?” Of course, they just stare blankly because it is a very ordinary photograph of our old and architecturally unremarkable education building, Colby Hall. 

Then I point to the very small image of a car parked in the street. “That,” I say in the way that I imagine anyone would speak of something miraculous, “is an XK 120.” And then I launch into an enthusiastic explanation of the Jaguar  XK 120, completely undeterred by the fact that almost no one ever matches my enthusiasm. Or reverence.

Given my history, you might think that I would be happy about the Trump administration deciding to roll back the Obama CAFE (Corporate Average Fuel Economy) standards, but I’m not.

That’s because although I have been a car guy since I was a little boy, as an adult I am now also an environmentalist (it’s that pesky Christian ethics thing about caring for creation and environmental stewardship) and the environment trumps the car stuff.

Especially now, when the world is literally burning up.

I am on vacation in Georgetown, Maine right now. It’s late afternoon. We are less than two miles from the Atlantic Ocean and it’s 90 degrees here. And it seems like it’s been 90 degrees forever. 

And this is not normal.

And it’s lots warmer almost everywhere else in the United States. And there’s a heat wave in Scandinavia. And a drought in Australia. And California is actually on fire.

A hot few days in the summer does not prove that global warming is real any more than a snowstorm in the spring proves that it’s not. But the global trends look suspicious. 

Then there’s the lobsters. They are migrating north toward the colder water. As Elaine says, “You can’t argue with a crustacean.”

Those who defend the relaxed CAFE standards argue that automobile emissions in the United States are a very small fraction of the global carbon footprint. But they are still one of the largest single things we can regulate. And this does not seem like the time to move in the wrong direction.

But there’s more.

The relaxed standards will cost more money, because the savings in manufacturing costs will be more than offset by increased fuel costs over the life of the vehicle. It will result in job losses and it will cause us to lose a competitive edge in the global marketplace.

The big thing is the environment. And the second thing is the economy. But it’s also about the cars.
The first cars produced in response to the energy crisis and the new emissions and safety standards of the 1970’s were truly terrible cars. They were slow, ugly, and not very fuel efficient. Since then we have been on a remarkable trajectory. Today’s cars are better in every way, and much of that improvement has been in response to government mandates in the United States and around the world.

Our 1952 VW Beetle was adorable. And on a good day it could get 25 mpg. Compared to the average of all cars at the time, that was pretty impressive. But the top speed was less than 70 mph, and that was downhill. With a tailwind. And it’s best not to think about crash safety.

By contrast, the 2012 V6 Mustang that sits in my driveway consistently gets better than 30 mpg on the highway (more than 34 mpg on one memorable trip to Maine). It has airbags and crumple zones. And it’s very fast. 

For comparison, the 1969 Mustang that Steve McQueen drove in “Bullitt” had a 390 cubic inch V8. It would do zero to 60 mph in just 5.7 seconds and could run the quarter mile in 14.1 seconds.

That's very fast.

According to the road test people, that would make it just a few ticks slower (s-l-o-w-e-r) than a 2012 V6.

And Steve never got 30 mpg.

Thank you for reading. Your thoughts and comments are always welcome. Please feel free to share on social media as you wish. 

Labor Day and the Parable of Market Basket

Therefore, my beloved, be steadfast, immovable, always excelling in the work of the Lord, because you know that in the Lord your labor is not in vain.
I Corinthians 15:58

Paul it taking the long view. In the end, everything matters. Nothing is lost. What we do makes a difference, and it makes a difference forever.

But in the short run, for many workers, their labor does seem to be in vain.

Things have improved. It is not as bad this Labor Day as it was a year ago, but that’s not saying much. A New York Times editorial points out that a year ago economists were estimating that it would take until 2021 to replace the jobs lost or never created since the recession of 2008. At the current rate of job growth the new date would be 2018.

The economy as a whole is growing. But labor is not sharing in that growth. In 2013 the after-tax profits of American corporations, measured as share of the total economy, equaled the record year of 1965. Wages, on the other hand, were at their lowest level since 1948. Productivity has increased dramatically, but wages have remained stagnant, resulting in large gains for corporations, and the wealthiest among us, while low and middle income workers have not benefitted, and have actually seen their wages decline over the past year, when we adjust for inflation.

At the very bottom of the workforce, there is an exception to the overall trend. The lowest 10 percent of workers made a small gain as a result of increases in the minimum wage enacted in thirteen states this year. That modest gain gives us hope that lifting the federal minimum wage might result in broader benefits.

There is no mystery in this. As Elise Gould points out in a research paper written for the Economic Policy Institute, the issue is our economic policy. And we can change it.

We can build our policy around labor, rather than around corporations. And we can change the tone of the national conversation.

Modern corporations do not treat workers as an asset. They are treated as a liability.

This is not only a problem for low wage workers. As an example, consider the widespread strategy of classifying employees as independent contractors, and workers as supervisors, in order to avoid in order to avoid paying the wages and benefits that would otherwise be required. The Times editorial observes that in California and appellate court recently ruled that Fed-Ex drivers are employees, not independent contractors, and therefore eligible for employee benefits. And the Times points out that “Decades of outsourcing government jobs to the private sector has undercut public employment, once a mainstay of middle-class life, even as evidence has mounted that outsourcing often does not save money or improve services.”

It is not a good story, but there is a counter-narrative.

The story of Market Basket might be a modern parable. The family owned chain has been immensely successful over the decades, expanding from a single store to their present total of 71 located in northern Massachusetts, southern Maine and south eastern New Hampshire. Earlier this summer, Arthur S. Demoulas engineered the ouster of his cousin, Arthur T. Demoulas, the long time CEO because he and other family members believed that Arthur T’s pro-worker, pro-consumer approach was limiting their dividends.

Arthur T, as he is known, built the business with his sharp business acumen and an intentional long term investment in his employees. They have generous wages and benefits, including profit sharing even at the lower end of the work ladder. They are also committed to promoting from within. The result is that they have many employees who have been with the company for decades, are very skilled at what they do and very committed to Market Basket and to Arthur T.

After the firing of Arthur T, there was an uprising. The non-union workforce basically went on strike in support of the man they believed had always supported them. As worker after worker repeated, “Arthur T. has always been there for us.” E. J. Dionne described the story in the Washington Post: “. . . eight senior managers organized an employee protest. They were quickly fired. Then all hell broke loose. The lion’s share of the employees at the chain’s 71 stores joined the protest, fully aware that they had no job protection. Market Basket’s customers (there is great affection for the chain) were drawn to the workers’ side.”

Dionne continues, “This worker-consumer alliance bore fruit last week when a $1.5 billion deal was arranged under which Arthur T. assumed control of the company, which has annual revenue of $4.6 billion. That is not the end of the story, of course. The new deal requires a ton of capital and that will affect the chain’s bottom line. It will be a challenge, but Arthur T. and his loyal employees believe they are up to it.

In his address to employees and supporters at a victory rally, Arthur T. told the group, “In this organization, here at Market Basket, everyone is special.” He went on to explain, “You have demonstrated that everyone here has a purpose. You have demonstrated that everyone has meaning. And no one person is better or more important than another. And no one person holds a position of privilege. Whether it’s a full-timer or a part-timer, whether it’s a sacker or a cashier, or a grocery clerk, or a truck driver, or a warehouse selector, a store manager, a supervisor, a customer, a vendor or a CEO, we are all equal. We are all equal and by working together, and only together, do we succeed.”

It is a victory for workers, for consumers, for fair working conditions, for community values, and for a compassionate capitalism that is committed to doing good while doing well. But it is not a universal solution to the problems of laborers and corporations in America. The Market Basket victory was possible only because Arthur T. was able to raise what the Boston Globe called “a boatload of cash” to buy out Arthur S. But even with all the caveats, it is still a ray of hope.

Sequestration: A Bad Idea about to Become Law

"For which of you, intending to build a tower, does not first sit down and estimate the cost, to see whether he has enough to complete it? Otherwise, when he has laid a foundation and is not able to finish, all who see it will begin to ridicule him, saying, ‘This fellow began to build and was not able to finish.’”
Luke 14:28-30

In his New York Times column last week David Brooks told the story of how the idea of sequestration originated. According to Bob Woodward’s book, “The Price of Politics,” the idea was introduced on July 26, 2011, when Jack Lew, who was at that time the White House budget director, visited Harry Reid’s office and told him that they had an idea to force a budget deal.

“What’s the idea?” Reid asked.

“Sequestration,” said Lew.

Then, says Brooks, “Reid folded himself over with his head between his knees, as if he were going to throw up. Then he came upright and gaped at the ceiling.” Reid told Lew that his staff had already suggested that as a last resort and he had told them, “Get the hell out of here. That’s insane. The White House surely will come up with a plan that will save the day. And you come to me with sequestration?”

The House and the Senate passed the legislation and the President signed it.

The theory was that this was an outcome so onerous that they would be forced to come up with an alternative plan to reduce the deficit.

As we now know, that didn’t work out nearly as well as they had hoped.

There are a few folks who think that the sequester will be just dandy, but most agree that it is a very bad idea. Economists say that it will slow economic growth by about a percent, which does not sound so bad until you recognize that even the growth projections, without the sequester, are between two and three percent. This makes the loss somewhere between twenty and thirty percent of the original projections. And it means many hundreds of thousands of jobs will be lost.

The common wisdom is that we need targeted cuts to reduce the deficit. The sequester is a blunt instrument; we need a scalpel. But the budget should be cut.

And the common analogy is the national budget is like your family budget. President Obama and Speaker John Boehner have both used this analogy many times, as have a host of other politicians and pundits. A family can’t spend more than its income, and the nation can’t spend more than it takes in. The fallacy in this is what economists call “the paradox of thrift.” In a family, saving money actually saves money, but in a national economy a reduction in spending by the government slows the economy, which results in slower job growth and reduced tax revenues. Spending creates demand and demand leads to growth.

Eventually the budget needs to balance (although some might argue that “eventually” should be a long time away), but in the short run, it will hurt the economy. And it will hurt real live people. And families. And communities. And the country.