Corporate Average Fuel Economy (CAFE)

The most important single central fact about a free market is that no exchange takes place unless both parties benefit. Milton Friedman

Corporate Average Fuel Economy (CAFE). Current CAFE standards require cars average 27.5 mpg. SUVs and light trucks are required to average 22 mpg. There is new legislation proposed that would increase the CAFE standards to 35-mpg for both SUVs and cars.

These proposals are designed to help the consumer save money and reduce the amount of oil used. As usual, when the government interferes in the market they, they really interfere.

Just because it will become cheaper to drive a mile in a car does not mean the consumer will drive the same as today. When goods and services are cheaper, the consumer will use more. If driving becomes less expensive the consumer is likely to drive more. The negative effect of this will be more highway injuries and fatalities, and no reduction in oil imports.

Ford chief executive officer Allan Mulally said, "While automakers have doubled the average fuel efficiency of vehicles on the road since CAFE was implemented in 1975, there are now three times as many vehicles on the road and they are driving four times as many miles. And the US now imports 68 percent of its oil, up from 28 percent in 1975."

The government should get out of the CAFE business. Instead they should raise the sales taxes on gasoline while lowering the income tax. This would give people a choice, which is what the market is about, to buy fuel and pay taxes, or look for a place closer to work to save on fuel cost. The consumer might choose to take public transportation, which is what the government encourages, in order to save expenses. As people avoided driving to avoid the cost, the highway injuries and fatalities would go down.

Charles Tolleson