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He's learned his lesson about risky loans, but Obama wants to increase research grants

The auto industry isn't very happy with the federal government.  After two decades of inaction on the fuel economy, President George W. Bush (R) and his successor, current President Barack H. Obama (D) have pushed legislation through Congress to stiffen fuel economy rules.  Those rules have cost the industry billions.  But both Presidents tried to make up with automakers by pushing federal funding initiatives that help automakers with the cost of fuel economy research, on the taxpayer dollar.

I. After a Decade and a Half Stall, Bush Kick-Started MPG Progress

A debate of economics aside, the approach seems to be working.  In a report to be released today, the U.S. Environmental Protection Agency (EPA) is expected to announce that between 2007 and 2012 fuel economy rose 16 percent, while carbon dioxide emission decreased by 13 percent.

In a report last year called "One Decade of Innovation, Two Decades of Inaction", the Pew Institute points out that there was essentially no gain in fuel economy between 1985 and 2000, despite rising oil prices in the late 1990s.  The agency says that this was the result of so-called "Reagonomics", writing:

In the mid-1980s, however, Ford and General Motors lobbied the Reagan administration to lower the standard. NHTSA complied, setting a 26-mpg standard for 1986, prompting Chrysler Chairman Lee Iacocca to declare, “We are about to put up a tombstone: ‘Here lies America’s energy policy.’ ”

(Note: 26 mpg was actually a drop from the 1985 standard of 27.5 mpg for cars.)

Reagan v. Bush
This chart speaks for itself. [Image Source: Pew Institute; AP, White House]

But it was another Republican President -- George W. Bush -- who reversed that stall.  In his 2006 State of the Union speech he turned heads, commenting:
This Congress must act to encourage conservation, promote technology, build infrastructure.... so America is less dependent on foreign oil.

He would go on to sign into law the Energy Independence and Security Act of 2007 (EISA).  The EISA would bump fuel economy standards to 35 mpg by 2020.

EISA prompted automakers to invest in new fuel efficiency technology, such as direct injection/turbo-boosting engine technology.  At the same time, automakers were forced to discontinue some "gas guzzling" models to boost their average fuel economy.

II. Obama Follows up With Stricter Standards, but New Incentives

But for all the moaning and groaning among automakers with EISA, it was about to even stricter with President Obama.  President Obama struck down a Bush-era mandate that forbid states from enacting their own stricter standards, paving the way for some states like California to set much loftier targets.

The new President also rolled back the deadline for reaching 34.1 mpg to 2016 in a 2010 CAFE update.  Those updates are expected to cost the auto industry $52B USD to implement, while potentially raising vehicle prices slightly and limiting selection to an extent.


President Obama's "test drive" of a Chevrolet Volt back in 2010. [Image Source: AP]

President Obama has also proposed rules that would set a CAFE target of 54.5 mpg by 2025.  Automakers are upset about the proposal, which the National Highway Traffic Safety Administration (NHTSA) estimates will cost them $144-152B USD.

The EPA and NHTSA claim that the 2017-2025 push to 54.5 mpg will save $1.7T USD in fuel costs (although the price impact on vehicles is not mentioned; one report suggest vehicle prices may rise $10K USD by 2025).  They say that by 2025, America will have reduced its oil consumption by 2 million barrels per day.  They add that by cutting 2 billion metric tons of carbon dioxide emissions over the same period society will have "saved" $326-451B USD (operating on the controversial "carbon credits" model).

Some fear the new fuel economy standards may cost lives, as automakers often reduce frame integrity during weight cutting, and also tend to cut out features like extra airbags.  Automakers are at least relieved that the President backed of an earlier stricter target of 62 mpg, which they argued could "kill the auto industry".

III. Speech to Call for $2B USD in Research Grants

At a speech at Argonne National Laboratory, a top federally funded research institution in the President's home state, President Obama is today set to unveil a proposal to toss a carrot to the auto-industry, which has at times been less than happy with him.

The video below will go live at 2:30 p.m., along with a corresponding live chat on Facebook.



Located approximately 30 minutes west of Chicago, ANL conducts a great deal of battery, fuel cell, and biofuel research -- a seemingly appropriate setting for the President to unveil a new fuel efficiency proposal at.  Under the President's requested proposal for Congress "[$2B USD in] funds would be set aside from royalty revenues generated by oil and gas development in federal waters of the Outer Continental Shelf."

The proposed $2B USD trust may in reality see a far smaller funding total, particularly amid the rancorous federal budget debates.  In 2012 President Obama asked Congress for $650M USD for advanced vehicle research, but Congress only offfered up $330M USD.

Argonne National Lab
President Obama's call for vehicle research funding will be held at
Argonne National Lab. in Illinois. [Image Source: ANL]

While hybrids have sold well in recent years, EV sales have disappointed, even as automakers put their marketing might behind the green, yet expensive cars.  Critics say that it's good Congress isn't giving more funding, in that the technology appears to be failing.  Proponents, conversely argue that the lack of funding is slowing development, which in turns increases EV costs and reduces their performance.

But critics are at least relieved that the President has turned away from providing loans to individual automakers or alternative energy startups.  After the boondoggle of Solyndra LLC going under and taking $553M USD in federal loans with it, President Obama has carefully shifted funding requests towards research.  No loans have been granted in the last two years from a $25B USD fund Congress set aside for vehicle research.

The Obama Administration's energy policy is in the midst of an overhaul amid the departure of U.S. Department of Energy Secretary Steven Chu, a Nobel Prize winner.

IV. CNG Tax Credit Proposal Revived

Also on the President agenda Friday will be plugging natural gas for vehicles.  Compressed natural gas (CNG).  The U.S. produced 25.3 trillion cubic feet (25.3e12) of natural gas last year, according to the U.S. Energy Information Administration.  Low costs and domestic production make this fossil fuel an attractive alternative to petroleum; the President thinks it could play a small, yet important role in the automotive market.

The President wants a tax credit for CNG and EV truck buyers equal to half the incremental costs (50% of the premium over a similar model gas vehicle).

CNG Ford Truck
President Obama wants tax credits for CNG truck buyers. [Image Source: Truck Trend]

It appears the President has dropped a separate proposal dubbed "National Community Deployment Challenge", which called for $1B USD to fund 10-15 "green" EV-friendly communities (paying for public chargers, etc.).

To contrast these funding initiatives with past government transportation funding, recent reports estimated that the government has spent around $1T USD to date to develop the commercial airport system.

And not all EV firms have proven disappointments.  Tesla Motors Comp. (TSLA) recently announced a plan to repay its government loans early, amid strong sales.

Source: The Detroit News



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RE: Bush?
By Reclaimer77 on 3/15/2013 4:56:04 PM , Rating: 2
quote:
Under Bush the debt went from 6 trillion to 10.7 trillion


Exactly! Yet when Obama triples this number, it's somehow not as bad??

I'm not going to sit here and support everything Bush has done. But everything on your list of bad things Bush did, Obama has doubled-down on them, expanded them, and continued them! That's my point.

"Bush did it" is beyond an effective defense at this point. It's pathetic!

quote:
left our budget crippled with tax rates that were too low.


Now this one I have a huge problem with. Put down the MSNBC or wherever you heard this, and educate yourself.

Lower taxes never, ever, hurt the economy. In fact how do you explain that right after the tax cuts, for the next 4 years, the IRS received record tax receipts?


RE: Bush?
By Shig on 3/15/2013 6:21:11 PM , Rating: 2
Lowering taxes is the equivalent of strip mining. You get a net positive effect in the short term and a crippling effect in the long run.

We are seeing that crippling effect now with record college tuition debt (money taken from public education) and completely deficient infrastructure that averages a D.

Then we have republicans preaching the positive effects of privatizing everything. Privatized healthcare - too expensive for most people to afford. Privatized Broadband Internet - highest costing broadband for the 27th rank in speed. Fully integrated privatized banking - yeah that worked out super great.

The ONLY way you should be defending the republican party is if you have millions of dollars in assets or make 250k+ a year. Otherwise you're supporting a party that doesn't exist anymore (i.e. republicans before Reagan).

By the way, the debt went from 12.3 trillion to 16.4 trillion under Obama's first term. You're probably asking why is it 12.3 instead of 10.6 when Bush left office. I'm glad you asked, that 1.7 trillion was what the economy lost in the time Bush left office and the bailouts were passed. Keep trying to throw it on Obama all you want, but he wasn't even in office until the deficit had reached 12.3 trillion.


RE: Bush?
By Reclaimer77 on 3/15/2013 6:32:26 PM , Rating: 2
Again, Obama has had two opportunities to revoke the Bush tax cuts. They are still in place. Probably because even HE knows what a disaster raising taxes in this economy would be. And before you try and blame Republicans on THAT one, try to remember the Senate/President is in charge of that.

Look I get that people hate Bush. But I do not understand how doing everything he did, and even expanding on that, is better. Which is all Obama has done since getting into office.

quote:
The ONLY way you should be defending the republican party is if you have millions of dollars in assets or make 250k+ a year.


LOl that old stereotype? Okay whatever, I'll let you have your fun.

quote:
By the way, the debt went from 12.3 trillion to 16.4 trillion under Obama's first term. You're probably asking why is it 12.3 instead of 10.6 when Bush left office. I'm glad you asked, that 1.7 trillion was what the economy lost in the time Bush left office and the bailouts were passed. Keep trying to throw it on Obama all you want, but he wasn't even in office until the deficit had reached 12.3 trillion.


Well there you have it folks, proof right there. Obama is clearly blameless in all this. It's not his economy, it's still Bush's. It's not him that's refused to pass a budget in 5 years. And he didn't take Bush's (still horrible) $340billion deficit when leaving office and push it into a $1.5trillion yearly deficit...

I love the logic here. Bush sucked, so everything happening under Obama is STILL his fault. And Obama and the Dems, nobody not even God apparently, can fix it.


RE: Bush?
By tng on 3/16/2013 8:55:25 AM , Rating: 2
quote:
I love the logic here. Bush sucked, so everything happening under Obama is STILL his fault. And Obama and the Dems, nobody not even God apparently, can fix it.
Of course not, they wont fix it because they don't want to. They can spend money on crap and then blame Bush.

I love people who extoll the virtues of the current admin talking about the transparency and the openness, yet ignore what is going on below the surface simply because he had a "D" after his name. What ever happened to critical thinking?


RE: Bush?
By JediJeb on 3/16/2013 11:27:36 AM , Rating: 2
quote:
What ever happened to critical thinking?


Sadly that class was removed from schools and replaced with ones teaching kids they are number one and there are never any losers in any competition.


RE: Bush?
By KCjoker on 3/15/2013 6:47:16 PM , Rating: 2
you might have a point except Obama was just recently quoted saying he had no intention of balancing the budget within 10 years. Then also the Senate controlled by the Dems finally after more than 3 years passed a budget. What was in that budget? More and more spending and more and more tax increases even after Repubs agreed to tax increases in Jan. Yet even their budget with increased taxes still didn't even approach balancing the budget. So don't pull that MSNBC talking point blaming Bush(yes he sucked) it's the Dems that have ZERO intention of even slowing the rate of spending. Of course anyone with a brain that proposes that spending be reduced you're called a racist that wants to put a shiv in the elderly and strangle children.


RE: Bush?
By StormyKnight on 3/15/2013 11:56:44 PM , Rating: 2
Obama doesn't want to put a budget in place. He will not willingly stop himself from spending spending spending. I mean, look at how he cried like a little bitch when the sequester came about. A 2.2% cut in extra spending, not what was already being spent. I mean, c'mon. If a business can find cuts in the double digit range, why can't the government cut just a widdle widdle bit??? This just shows Obama's complete ignorance of economics. He is a complete and utter moron.


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