Motor Trend magazine reports that meeting President Obama’s fuel-economy standards for 2025 will cost consumers $6,714 more per car. This is based on a paper published by the Center for Automotive Research last June, when Obama’s standards were still in flux.
There is some debate over this conclusion: a group called the International Council on Clean Transportation thinks that CAR has exaggerated the difficulties (CAR’s response). ICCT notes that the auto industry has a history of crying wolf when the federal government proposes new safety or pollution standards: Henry Ford II, for example, predicted that seatbelt and safety glass standards would “close down” his company.
The CAR report is based on the cost of using existing technology to meet Obama’s standards. While the Antiplanner doesn’t believe that “if you mandate it, the technology will come,” it is just as foolish to assume that there will be no technological improvements between now and 2025.
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The base price of a 1964 Mustang was $2,368, which, using the consumer price index, translates to about $17,000 in 2011. The base price for a 2012 Mustang is about $22,300, or almost a third more. Is all of that difference due to new pollution, safety, and fuel-economy standards, or is some of it due to other improvements or improvements that would have been made anyway?
The original Mustang came with an anemic, 101-horsepower engine with a three-speed transmission that got very poor gas mileage. The 2012 base model has a 305-horsepower engine, six-speed transmission that gets more than 30 miles per gallon. Improvements such as these are probably worth a little extra, and buyers who would rather have a car with a 101-horsepower engine have their choice of several cars that cost a lot less than the Mustang. The 110-horsepower Hyundai Accent GL, for example, costs about $10,705, which is about $1,520 in 1964 dollars.
So while the Antiplanner is not enthused about government mandates, I am not panicked about them either. The new fuel economy standards are pretty strict, but if gas prices stay high I suspect they are not a lot stricter than the market would produce anyway.
The Antiplanner wrote:
The CAR report is based on the cost of using existing technology to meet Obama’s standards. While the Antiplanner doesn’t believe that “if you mandate it, the technology will come,†it is just as foolish to assume that there will be no technological improvements between now and 2025.
The record of the auto industry in North America when it comes to vehicle emission controls is one of “doing the impossible,” meeting increasingly complex and demanding reductions in various toxic tailpipe pollutants. Especially the restrictions on NoX (nitrous oxides), which were imposed in the early 1990’s to limit this class of pollutants which are ground-level ozone precursors, were considered extremely difficult to meet (and the anti-auto/anti-highway/anti-mobility industry (at the time) could barely contain its glee at finally forcing all federal transportation dollars away from highway expansion and improvement and into the rail transit projects that it claimed would replace private automobiles).
Of course, instead, the auto industry came up with improved and effective emission controls and the petroleum industry reformulated motor fuels (including Diesel), which led to dramatic improvements in air quality (and reduced ozone precursors), without massive new spending on rail transit projects, even as standards for NoX and ozone have been repeatedly tightened.
So I believe that the auto industry can and will meet standards for improved fuel efficiency.
Much easier to improve the miles-per-gallon than it is to force taxpaying citizens onto legacy rail transit systems.
These CAFE mandates seek the same result as a higher gas taxes, with four major differences:
1) They don’t work as well as a higher gas tax would in reducing gasoline use and emissions
2) They cost Americans more money than a higher gas tax would, over the course of the life of a car
3) Unlike a higher gas tax, they offer no new revenue to fix the roads
4) Because consumers bear the cost of these mandates when buying cars from private companies, it doesn’t FEEL like a government-mandated tax and is therefore easier for spineless politicians to promulgate
Obviously, #4 continues to trump 1 – 3.
“Is all of that difference due to new pollution, safety, and fuel-economy standards, or is some of it due to other improvements or improvements that would have been made anyway?”
Funny that innovation and technology make products more affordable. Replace “car” with “computer” in the above discussion for an example.
Or swap out “cell phone” for “car”. The DynaTAC 8000X was released in 1983 with a $3,995 retail price–$9,000 in 2011 dollars. Best Buy sells the AT&T GO Phone (which comes w/o contract) for $9.99.
The real question is why haven’t significant automobile technological innovation resulted in lower prices for consumers?
Maybe this and this have something to do with increased auto prices.
@Frank: Computer capacity and performance operates under Moore’s Law towards a logarithmic expansion. The power & performance of any solid state electronics double every 18 months; and they’ve been doing that since the 1960’s. If automotive speed, efficiency, and power did that they’d be getting hundreds of thousands of miles to the gallon and travel faster than the speed of light. Computers rely on moving bits of light around and require fewer and fewer moving parts each generation. A car is a mechanical device that requires dozens of moving parts all of which suffer from parasitic loss of energy due to friction generating heat and wear & tear.
An iPhone has thousands of times more memory and precision and is thousands of times faster than the Apollo guidance computer. But like the space race that helped to usher in the affordability and power of microprocessors right now companies are offering prizes for automotive design challenges. A sort of automotive X-Prize. I think it’s a 5 million dollar prize for anyone to develop a safe, practical, functional, fashionable cars that get 100 mpg or better and feasible for mass production. Obamacar programs have already raised the price of used cars under the cash for clunkers program. They crushed the cars they took away. But most low income people typically buy a used car not a new one. They’ve reduced the amount of otherwise useful used cars and raised the overall price of used cars on the market by nearly 2,000 dollars.
Frank, increased union (mostly UAW) wages and benefits have certainly raised the prices of some new cars and light trucks.
But that argument does not work when we discuss motor vehicles assembled in U.S. assembly plants that are not organized by the UAW, including well-known manufacturers that compete effectively against the UAW-organized companies (Ford, GM and Fiat (as owner of Chrysler)), such as BMW, Honda, Toyota, Mercedes-Benz and Kia (and probably a few others). I seem to recall that the Mitsibishi plant in Illinois is organized by the UAW, but I could be wrong about that.
Frank and CPZ:
Maybe this and this have something to do with increased auto prices.
Frank, increased union (mostly UAW) wages and benefits have certainly raised the prices of some new cars and light trucks.
I would suggest the price of steel and oil (body, frame and plastics) and energy, and also the development costs for models (engineers, management, prototyping, etc.) and the marketing costs has more to do with the cost of cars than UAW wages. And the wages of auto workers should be higher that average. You are comparing skilled manufacturing labor to all manufacturing labor, which includes a number of rather unskilled jobs.
Also worth noting that Big 3 cars cost the same retail as cars made by $20 per hour labor in South Carolina for foreign companies.
Maybe, if you two (and many others) weren’t so blindingly biased, you would realize that @ 22 man hours per vehicle assembled, UAW labor is just not that big a cost factor in making cars, whether that labor costs $20 or $50 per hour. You are only talking a few hundred dollars cost input in a vehicle that costs $20,000 and up.
If costs went up $6700, but fuel efficiency really doubled, the payback time would be about 4 years, while cars are typically owned for 10 years.
How is that not a good idea?
A better question is why this must take years and years. Cars in Europe get much better mileage than our cars right now. I drove a Ford Mondeo in Germany in 1997 that got me 37 mpg while driving 80-110 mph on the Autobahn. Advertised mpg was 40+ mpg for regular driving. The Ford Mondeo is a standard size 16’x6′ car (essentially the same size as a Ford Taurus). I think I know the answer though, and it has to do with the American fascination with enormously overpowered engines and being able to go 0-60 in under 7 seconds.
Look at the current MPG’s advertised in Britain by Ford:
http://whatmpg.co.uk/Ford%20MPG%20information.html
People always complain about high European fuel prices from taxes, but they forget that the prices are compensated by much more fuel efficient vehicles. Sure $8 per gallon sucks, but $8 per gallon at 40 mpg is no worse than $4 per gallon at 20 mpg, and the converse is that the tax revenue generated permits other taxes to be lower.
I appreciate most of the discussion here. I am not an expert on this subject, nor do I claim to be, and I read this blog and the comments to learn.
I appreciate LazyReader pointing out the difference between electronic technology and machine technology, and that’s something I thought about after posting, but I still wonder why advances in mechanical technology and manufacturing haven’t pushed down prices. (And I bought a used car in January with the profits from my silver investment four years ago. No one is selling at Kelly Blue Book, private or dealer. Used car prices seem to have increased after cash for “clunkers”.)
Thanks, CP, for pointing out the limited nature of my argument; I also thought about this after posting, and hoped someone would address it.
Andrew said: “Maybe, if you two (and many others) weren’t so blindingly biased…”
First, Andrew, I used the phase “Maybe this and this…” Please note the *maybe*. I’m not just throwing out an opinion; I’m wondering aloud test a proposition and spur a respponse. Thank you for providing the information on labor cost per car. Please also realize that I am NOT blindingly biased; I am fully aware of my biases as they have changed drastically in the last five years.
Are you fully aware of yours?
Frank:
It took all of two seconds to google “man hours per car” to find that both Toyota and GM spend about 22 man-hours to assemble a car, and basic math will tell you at 22 hours at any labor cost under $60 per hour is less than 5% of the cost of a car.
If you are going to suggest there is a huge greedy UAW labor component to cars going from around $5000 in 1979 to $25,000 today, the simplest thing to do first would be to find out what present day UAW labor costs are and what the differences in productivity rates are between now and then.
In fact, considering the advantages of automation and the tendency of productivity to increase, I would suspect that a lot of today’s higher labor costs per hour are balanced out by productivity increases since 1979.
There is nothing wrong with holding biases and opinions – we all have them and its why we argue and discuss. But there is no reason to not do sanity checks on widely available numeric quantities before jumping to conclusions like “its all labor’s fault”, even when jumping to conclusions is really fun or supports our preconceived notions. That is the great thing about the internet – all that information needed to make an airtight argument to (hopefully) support our position is just two seconds away.
I will grant that you hedged your position with the modifier “maybe”, while Mr. Zilliacus went all-in with “certainly”. “Certainly?” There is more negotiating room at the dealership with the retail price than there is cost from UAW labor input! The UAW could assemble for free and most people wouldn’t notice the possible price change.
Frank:
I still wonder why advances in mechanical technology and manufacturing haven’t pushed down prices
Mechanical manufacturing relies heavily on expensive materials and energy inputs where electronic manufacturing does not. Materials like iron, plastics, aluminum, copper, glass, just go up in price due to scarcity vs. world demand. Energy prices have done nothing but go way, way up.
Mechanical manufacturing also requires a much larger capital base of industrial plants to manufacture the heavy components – steel mills, aluminum smelters, copper smelters, stamping and machining plants, glass plants, plastics plants and refineries. Around 25% of US steel production goes into car and truck frames and bodies. How many billions of dollars of invested capital goes every year to feed 25 million tons per year of steel production?
Transportation of mechanical goods is obviously much more expensive per unit and transportaiton is all about fuel and labor and fuel and labor does nothing but go up and up. One supersize railroad box car could carry 10,000+ computers, while a similar sized auto-rack can carry 10-15 cas. Shipping costs of drayage, rail, and trucking for a finished car probably approach $1000, while a computer can be shipped from China to store for a few dollars per unit. All the inputs into the car also had to be shipped too – iron ore and coking coal or scrap iron to make steel, steel coil to make body parts, body parts to the assembly plant from the stamping plant, etc., meaning the price of the car embodies multiple expensive movements of heavy materials. One railroad car of iron ore or scrap steel can make about 60 cars, as can a flat car of plate or coil, one box car of body parts probably holds about 30 cars of frames or doors or quarter panels. All the stages of haulage before final assembly is adding hundreds to the price per unit.
Development costs also appear to be much higher for mechanical goods. Its typicaly to spend over $1 billion to produce a new car model, which at 100,000 units over 5-10 years is $1000-2000 per car. The iphone supposedly cost $150-200 million to develop, and Apples has sold 50 million of them, so development costs were a few dollars per unit and going down.
Factory costs appear equal between heavy equipment factories and electronics factories – both are in the $1+ billion order of magnitude, but the electronics factory probably has a 10-100 fold order of magnitude advantage in unit output. Auto plants will output cars in the hundreds of thousands per year while electronics plants output is in the millions or tens of millions.
So I think size and weight are your main explanations.
Spartansburg County, South Carolina? I think thats is where they make the BMW X3, X5, X6 and M. Not that I would buy a BMW, they smell funny. Still jobs are jobs, they should make realistic version of their I- electric concepts.
http://www.conceptcarz.com/view/photo/727160,20135/2012-BMW-i3-Concept_photo.aspx
@Frank: Well for one a lot of the that mechanical technology has improved in recent decades. You could certainly build a car out of the most advanced materials currently available. Things like carbon fiber, aerospace composites or space age alloys or titanium and the vehicles would be very light almost cut in half. But the cost of it would make you reconsider where as steel is easy and cheap to buy, shape, weld and recycle. Also the danger of lighter vehilces is increased chance of rollover even if the car has a low center of gravity. While if you were to strike a car it poses less of a threat while if a heavy car strikes your light car it’s more likely to get tossed further due to less mass to stand up to an impact. Even though steel alloys have declined in weight, manufactuers have simply added hundreds of pounds of safety and entertainment technology. So cars will still be heavy for the forseable future.
As for computers, they have almost no moving parts except for cooling fans and rotating disk drives and so on. And the chips get better quickly. In the battle for mechanical vs. electronic. You could by a 1955 Chevrolet Corvette, sweet I know; and it will still work. But would you buy a 1955 era computer, you’d be either stupid or nostalgic.
LazyReader wrote:
As for computers, they have almost no moving parts except for cooling fans and rotating disk drives and so on. And the chips get better quickly. In the battle for mechanical vs. electronic. You could by a 1955 Chevrolet Corvette, sweet I know; and it will still work. But would you buy a 1955 era computer, you’d be either stupid or nostalgic.
Excellent analogy.
Reminds me that my mechanic (who’s a Chevy guy) had a 1962 red Corvette (only came as convertible up to 1962) in his shop recently. 327 cid V8 with a four-speed standard transmission, all in good working order and street-legal, though this car needed a paint job.
That 62 Corvette is a gorgeous car (I like the “early,” 1952 to 1962 models with exposed headlights, the mid-1960’s, and, strangely, the ones being built by GM today the best, but don’t care for most of the rest of them).
Frank wrote:
I appreciate most of the discussion here. I am not an expert on this subject, nor do I claim to be, and I read this blog and the comments to learn.
I appreciate your comments and participation here.
I appreciate LazyReader pointing out the difference between electronic technology and machine technology, and that’s something I thought about after posting, but I still wonder why advances in mechanical technology and manufacturing haven’t pushed down prices. (And I bought a used car in January with the profits from my silver investment four years ago. No one is selling at Kelly Blue Book, private or dealer. Used car prices seem to have increased after cash for “clunkersâ€.)
I have not ventured into the used car market for many years.
Thanks, CP, for pointing out the limited nature of my argument; I also thought about this after posting, and hoped someone would address it.
You are welcome.
I also think that the future demands of the UAW are going to be rather tempered by the mere presence of so much nonunion auto manufacturing in the United States (and maybe in Canada and Mexico, though I don’t know much about organized labor in Mexico, and the Canadian Auto Workers’ union split from the UAW back in the 1980’s).
But many have said that the damage done to the “native” U.S. auto industry is going to take a long time to heal, and both management and the UAW deserve blame.
Andrew said: “Maybe, if you two (and many others) weren’t so blindingly biased…â€
Biased? Who is biased? I don’t think you are especially biased.
First, Andrew, I used the phase “Maybe this and this…†Please note the *maybe*. I’m not just throwing out an opinion; I’m wondering aloud test a proposition and spur a respponse. Thank you for providing the information on labor cost per car. Please also realize that I am NOT blindingly biased; I am fully aware of my biases as they have changed drastically in the last five years.
See above.
Are you fully aware of yours?
Andrew can answer that if he wishes.
Mandating more efficient engines will not make it so, regardless of requirements to pay $7G or more.
Electric cars? RR has has one for more than $400G, but that’s an outlier.
The Tesla is about $80G.
Full analysis is not done: How much more energy & resources are used in production. Look at electricity sources, almost 3/4 are carbon-based.
California has an ironic problem (often) in their progressive electricity rate structure — kilowatt-hours are charged more above certain levels. So, a family of 3-6 is charged more per energy unit than a single person, even though the family has a higher efficiency on energy per person, and then to add a car-charge to the grid will cost much more. Although that is easily fixable, but the greeny movement is really against anything that works or even has some chance — nuclear, hydro, solar, wind, natural gas, drilling for oil in wilderness — numerous attempts to stop all.
Ironic again on how many are against energy sources which created development. There is no viable source of mobile energy other than oil. Even for ocean cargo, the Savannah was not worthy.
Companies want to make more efficient products — gov coercion is not needed, although some push can help, partially. Technology has limits, even at another $10G per vehicle. Look at natural gas — upgrading a bus for that is $100G (roughly, vaguely). Some of you readers know specifics. Plus — What are the advantages? Oh, GHG is irrelevant — AGW is highly exaggerated.
Unions (monopolized labor) are killing the country, particularly in manufacturing, construction & mostly — public service, including the pensions. Davis-Bacon (w/racist origins) & other prevailing-wage laws, which are anti-liberty & anti-better price, increase the ruinous effects of unions.
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http://joannenova.com.au/
http://www.globalwarming.org/
http://scienceandpublicpolicy.org/
http://www.climatedepot.com/
Scott wrote:
California has an ironic problem (often) in their progressive electricity rate structure — kilowatt-hours are charged more above certain levels. So, a family of 3-6 is charged more per energy unit than a single person, even though the family has a higher efficiency on energy per person, and then to add a car-charge to the grid will cost much more.
I do not know the dynamics of the electricity market in California, but I find it strange that electricity use is not billed at higher per kWh rates during the time of day when demand is high (weekday days and afternoons), and at lower rates during the overnights (good time to charge an electric car) and on weekends and holidays.
Although that is easily fixable, but the greeny movement is really against anything that works or even has some chance — nuclear, hydro, solar, wind, natural gas, drilling for oil in wilderness — numerous attempts to stop all.
Many in the U.S. Green movement want to compel lifestyle changes (ride a bike or rail transit, do not own a motor vehicle) in order to improve the environment.
Ironic again on how many are against energy sources which created development.
Including the use of external-combustion coal-fired mobile sources, which powered most steam locomotives.
There is no viable source of mobile energy other than oil. Even for ocean cargo, the Savannah was not worthy.
Conservation and lifestyle changes (and less prosperity) are what most of those groups want to impose. Never mind that (as I have mentioned here before) impoverished totalitarian nations like the former Soviet Union and the former East Germany were terrible stewards of the environment.
Companies want to make more efficient products — gov coercion is not needed, although some push can help, partially. Technology has limits, even at another $10G per vehicle. Look at natural gas — upgrading a bus for that is $100G (roughly, vaguely). Some of you readers know specifics. Plus — What are the advantages? Oh, GHG is irrelevant — AGW is highly exaggerated.
Though as I suggested above, U.S. and Canadian government-mandated emission controls and reformulated fuels have made a difference and led to dramatic improvements in air quality.
Unions (monopolized labor) are killing the country, particularly in manufacturing, construction & mostly — public service, including the pensions. Davis-Bacon (w/racist origins) & other prevailing-wage laws, which are anti-liberty & anti-better price, increase the ruinous effects of unions.
Except that the vast majority of the U.S. working population is non-union, especially in manufacturing, and even where private companies are unionized, they can still make a profit (consider UPS, where its U.S. hourly workforce is 100% unionized).
Note that I agree with you that U.S. “prevailing wage” laws (including Davis-Bacon) and Section 5333(b) of the Federal Transit Administration Act (f/k/a Section 13(c) of the Urban Mass Transportation Act of 1964) probably drive up costs on projects and employers covered by them.
But consider also that the out-of-control costs of the U.S. health care “system” contribute to the high costs of hiring employees – and that is something that has relatively little to do with unions or unionized labor.
So a big family that watches the TV is more efficient than the single man watching it. Will the government mandate TV pooling. Really energy is not the problem, energy is the solution. Energy usage among the rest of the world is steadily growing. The United States will require 45 percent more energy by 2030. The rest of the world is going to require 60-70 percent more. China is building 100 gigawatts of coal fired power annually. Our friends at GOOGLE may pride themselves by building solar power arrays on their headquarters worth maybe a few megawatts. Meanwhile they are building 100 megawatt data centers and servers just to move bits and bytes around. The sheer volume of BS and talk about energy, energy prices, and energy policy on both sides of the political aisle. Most of what we think we know about energy are mostly myths passed around by the green movement. Energy demand will never decline in any respectable level, certainly not by physical limitations. More efficient cars, engines, thermostats and light bulbs will never lower demand. Energy supply on this little planet of ours is practically infinite. Expanding energy supplies mean higher productivity, more jobs, and a growing GDP. Across the board access to energy will improve our environment so energy isn’t the problem. Most of what we think of as energy waste is irrelevant and trying to improve energy efficiency is almost as pointless. Discarding energy is not the sin the environmentalists would have you believe.
We continue to invent new ways to waste energy. Only by throwing most of the energy away that we can put what’s left to productive use. We waste energy to produce a mere 100 watts of light in a filament and why? The sun offers us 100 watts of light for free, through a simple skylight or window yet we pay good money for the bulb and the electrons that power it. A mere laser is even more inefficient than the bulb. That laser doesn’t deliver more power than the bulb or the skylight, quite the contrary, it delivers less, and we waste huge amounts of ordinary light producing it. It takes big arrays of flash lamps, mounted around a large gas cavity, to stimulate the emission of the focused laser. The laser burns through energy to generate light and tosses away most of its fuel in doing so. But we run it anyway, because lasers can cut metal, measure landscapes, operate on tumors, restore our eyesight so we can actually use that natural or artificial light to read, all because we wasted so much energy on that laser. The 2nd law of thermodynamics accounts for entropy, vast sums of energy will always be wasted. Most electricity we put into our machines winds up useless heat energy which must be exhausted or our devices would fail due to strain and heat build up. We dump one unit of heat into some distant power plant’s cooling tower so that we can dump four more units of (unwanted) energy out of the window of our living room, that’s called air conditioning, not to mention Refrigerators. It takes perhaps ten units of raw thermal energy to pump one unit of ultrareliable electricity into a microprocessor then pump the waste heat back out all in the name of Facebook, YouTube & Twitter. Even mother nature; enormous quantities of energy are wasted to produce sugars, plants are green because they only permit and use certain frequencies of light to commit to photosynthesis; The rest of the spectrum, the omitted colors, the UV light, the gamma rays, the X-rays, the microwaves…….totally wasted. The leaves of the tropical rainforests are smooth and waxy, designed to reflect the vast majority of that intense equatorial sunshine.
As before, energy supply has few thresholds, There is enough nuclear fuel to facilitate all current or growing human energy needs for the forseable future. We may have to bite the bullet and unleash the nuclear genie or at least enhance research to make reactor tech an affordable asset in the near future. Nuclear waste is a manageable affair. It’s not waste it’s spent fuel (of which only less than 4 percent is waste), most of which is still useful uranium that is just too hot to use now. The risk of plutonium proliferation is mute when you consider the nations that do it already have it. Canada uses heavy water reactors to use natural uranium unrefined and produces no plutonium. Deep bore holes thousands of meters underground hold key to storing actual waste indefinitely. Once you drill the hole and deposit the waste, you fill it back up with the material you drilled. The thickness of the natural barrier of kilometers of rock will safely isolate the waste from the biosphere for a very long period of time posing no threat to the environment. For countries that do not rely on nuclear power plants, their entire inventory of high-level nuclear waste could perhaps be disposed of in a single borehole. Even the spent fuel generated from a single large nuclear power plant operating for multiple decades could be disposed of in fewer than ten boreholes. Another attraction of the deep borehole option is that holes might be drilled and waste emplaced using modifications of existing oil and gas drilling technologies. The environmental impact is small. The waste handling facility at the wellhead, plus a temporary security buffer zone, would require about one square kilometer of land. When the borehole is filled and finally sealed, the land can be returned to a natural condition. Even if your opposed to nuclear power, it offers a mitigation strategy to existing waste; something the green police refuse to acknowledge or even talk about as they have no solutions.
Scott:
There is no viable source of mobile energy other than oil.
That needs a lot of caveats. Trains, trolleys, and electric trolley buses seem to run just fine off electricty from overhead wires. Large ocean-going ships can obviously operate off nuclear power like aircraft carriers and submarines or off coal, as in days of yore. Cars can operate off ethanol (although the quantity available for the whole world is clearly limited with present technology). There are of course issues of capital and control of dangerous items like mobile nuclear power plants.
You would be more correct to say there is no viable source of mobile energy for small family scale vehicles at the numbers presently operated other than oil.
Unions (monopolized labor) are killing the country, particularly in manufacturing, construction & mostly — public service, including the pensions.
Except for government workers, the vast majority of workers (I think it is 9 out of 10) are non-union. Hard to believe unions can have much of an effect at all when they only cover 10% of the private workforce.
Government workers compensation appears to be a problem mainly at the local level, where feckless politicians have made promises of pensions and health insurance and then failed to fund them. Federal employee costs are minimal in comparison to the overall Federal budget – roughly about 10%.
Unions are killing the country in the sense that they make it harder the US to be a competitive low-wage manufacturing center, because they keep threatening to organize those $9 per hour production line employees. But is that really such a bad thing? Do we want to see wages and compensation for the bottom 60% of the wage scale continue to stagnate or fall? How does impoverishing half the country rebound to our benefit as a nation? Are Sweden and Germany and Switzerland non-competitive because of unionized manufacturing labor? In many manufacturing enterprises, labor is a relatively minor cost. The productivity of labor is generally more important than the compensation, as unproductive low wage labor cannot compete with highly productive high wage labor. A lot of our export competitive US manufacturing is in unionized industries – airplane and locomotive manufacturing, earthmoving and farming equipment, automotive sector, petrochemicals. The competition in those industries is not $5 per day Asian labor but similarly high wage and unionized European and Japanese labor.
Davis-Bacon (w/racist origins) & other prevailing-wage laws, which are anti-liberty & anti-better price, increase the ruinous effects of unions.
The intent of Davis-Bacon was that federal projects should employ local labor, rather than promoting a race to the bottom in wages by bringing in out-of-state (or out of country) low wage labor. Prevailing wage laws do not hinder anyone’s liberty. Everyone is free to bid on federal contracts. The law simply states that the Federal government will pay prevailing wages on contracts, and will not resort to cut-rate labor in an effort to achieve cost savings. How does being promised a higher rate of pay hinder your liberty? It should actually be easier to compete – if you have the more efficient workforce and lower cost suppliers, you should win the work because everyone’s labor rates are equalized.
By forcing competition to be based on workforce efficiency instead of labor costs, the result should be a superior product for the federal government as the most productive company should win the contracts. We have found at my firm that productivity in construction usually comes from firms that are safe and have a low rate of rework from construction and fabrication errors, resulting in less claims activity later, lower insurance premiums, and fewer lawsuits.
We can all see what happens without Davis-Bacon and in non-union locales and industries – construction work is completely taken over by low wage illegal immigrants or desperately poor low wage migrant southern workers (black and white) when the employer has some sort of concern about at least employing legal workers.
LazyReader:
China is building 100 gigawatts of coal fired power annually.
What happens when China runs itself out of coal by mining 4 billion tons per year (and growing)? Or do you think that will never happen?
Energy supply on this little planet of ours is practically infinite.
That’s close to blasphemy. God alone is infinite. Creation is inherently limited especially with regard to continued exponential growth.
Expanding energy supplies mean higher productivity, more jobs, and a growing GDP.
This is certainly so. But what source satisfies the ever exponentially larger energy demands? 3% growth forever means a doubling every 24 years and an order of magnitude every 80 years. What are the sources of 10 fold increase in energy consumption from present?
There is enough nuclear fuel to facilitate all current or growing human energy needs for the forseable future.
A citation for this would be great, because the world has been running nuclear power on recycled warheads for a while now.
@Andrew: Recycling warheads was simply a PR campaign and a political move to remove heavily refined uranium and take plutonium out of the hands of the Russians. It’s easier to use it in a reactor, than to refine raw fuel because the Russians already refined it. Nay-sayers suggest that a peak in uranium production will occur before the year 2050 – 2070. What they don’t take into account is spent fuel reprocessing which removes the radioactive actinides from the useful uranium. Nuclear waste is a misnomer, it’s spent fuel (96 percent of which is still useful uranium) thats too hot to use now, the atoms are too widely spaced for proper neutron bombardment. Reprocessing fuel that’s been allowed to cool for 4-5 years extends the current fuel supply 60 times. Suddenly a 50 year supply becomes a 3000 year supply. If neutron absorbing breeder reactors (called “Fast reactors”) do come into market, they produce more useful fuel than they consume. Right now there is nearly 4.6 million tons of uranium locked up in current estimated reserves. The United States has the fourth largest reserve of uranium, with Australia being number 1 I think ( ironically the Aussie opposition to nuclear didn’t stop them from selling uranium for export). Now there’s 46 million tons of additional uranium locked in mineral types that hold key for future economically viable extraction. And of course there are billions of tons of it dissolved in the oceans. Japanese scientists did demonstrate they can extract uranium from sea water, albeit not in an economical fashion yet. But emerging technology may yet provide oceanic mining of nearly 60 different trace elements and minerals such as gold, platinum, copper, lithium, neodyminum, silver, potassium, phosphor, calcium, vanadium, cobalt and titanium, etc. A pound of uranium produces more energy than burning 900 tons of coal.
LazyReader:
I agree there is great potential in uranium and reprocessing fuel. In fact, one of the best things about Yucca Mountain dying is that we haven’t shoved it all down a hole and wasted it. But is it enough to continue 3% growth for the forseeable future?
If uranium is about 10% of world electricity and thus perhaps 5% of total energy consumption, simply doubling energy consumption in 24 years all via more nuclear power would require a 20 fold increase in uranium consumption. If not uranium, what other sources are we going to double or tap into? Is doubling oil output realistic – where are the fields? It was 40 year to double world oil output to the 2005 peak – only 1.75% growth. China has certainly doubled world coal production on its own in about 10-15 years, but only by rapidly burning through its reserves.
On the other hand, the US (and other countries) have shown no signs of sustained 3% growth at any time since 1999 and no signs of it in the near future either, meaning that we have already missed out on lots of growth we “should” have experienced (thus the flat stock market and employment market). Maybe we’ve already hit the wall for any number of reasons – no more cheap energy, lots of people aging, many people becoming complacently wealthy and high earning so that another 3% doesn’t mean as much?
CPZ: I did not address electricity rates for times of day. In the future, please go to points mentioned.
Behavior changes for biking or walking have vast limitations (weather, distance, lightning, risk, physicality), but for those appropriator distances (1-3 miles), the replacement of car usage (VMTs), is very minimal, plus very inconvenient.
Not sure what you meant in your fragment of “Including the use of external-combustion coal-fired mobile sources, which powered most steam locomotives.”
Sounds like you’re throwing-back to coal-generated stem, which was basically only for trains. Are you unaware that 97%+ of mobility is by oil? (Unsure of amount, maybe 99%).
For oceans cargo, why are there not nuclear powered ships? See Savannah; I knew that few would now of that. Is there a 3rd alternative?
The union destruction is a big discussion; too much for here, but its impact has more power than readily evident in the 7% unionization of all workers & much larger in the public sector.
Unions are much more prevalent in goods-producing industries, where the US has been losing at for decades. Another case: Why have students’ performance been stagnant for 4 decades, while real costs per pupil have tripled? The Dept. of Ed. has not helped.
Q: Why has there been so much outsourcing & decline in manufacturing?
A: Higher labor cost, plus many excessive gov regs.
Try a measurement: Look at the CPI. Generally, prices have risen 8 times since 1960. For construction, the costs are far more; see bridges or other public infrastructure.
For electronics (private sector), the reverse is far true even fewer nominal dollars buys much more.
The US medical portion of the GDP, 18%, is far larger than any other nations. Not sure why you went that subject. I could list 5-9 reasons for that, but it is still kind of a mystery, but the best medical service in the world is provided. There are other reasons why the lifespan in the US is not in top 10.
I think your point on medical was for redistribution — that employers should not pay or some other crap. Who should pay? Get the hell outta here, thief! How about workers get paid a gross amount — based upon merit, productivity, whatever — and they decide where to spend it? Getit?! — paid so much per hour or week — flat out; You decide to amortize over days off/holidays or towards certain purchases.? That is not even referring to the payroll taxes, in which the employers pay an equal amount, totaling about 15%.
CPZ, (Please forgive a few previous typos)
I forgot one of the main points:
“Viability” in mobile energy.
A few usages for electric does not have credence.
Please look at the limitations, including the very few passengers, plus the energy source.
Andrew, Forgive the slam, but you need too much education to respond much, which would take pages. Are you aware of that? You might even have a masters, but please don’t pretend to know stuff on fields that you have little knowledge of.
Do you make intricate repairs on your car or HVAC system? No, because that is not your expertise.
Liberty on wages on bids? A company or a person is not free to offer services in comparison to unions. Shouldn’t companies & gov units be able to choose a better price.
Unions & their pensions killed 2 of the BIG 3 car-makers — only revived due to taxpayer money.
Most products are imported because of unions — look at the great prices at Walmart.
What happened to steel production, in the US?
Why is there outsourcing?
What electronics are made in the US? Textiles?
Why are bridges so expensive, now — more than 20 times as in the past?
Why are public workers paid more than double for comparable work & output in the private sector. plus get huge pensions?
Caterpillar is one of the few great US manufacturers & exporters. It has come close to death because of unions & could do better without. “If it works in Peoria” — well, that’s another subject.
Try living w/out oil — don’t forget, not just your use, but any product that uses, including transport.
Scott:
Shouldn’t companies & gov units be able to choose a better price.
Lower wages don’t imply a better value or price, but do tend to reflect on skill and productivity. Why do you suppose laborers are low paid, and ironworkers and electricians are highly paid?
In my opinion, the government should be contracting for best value in the work and best qualifications in the people employed by the contract. The government has no business driving down wage rates through its contracting.
Unions & their pensions killed 2 of the BIG 3 car-makers — only revived due to taxpayer money.
Management and their crappy products and designs had nothing to do with it?
Most products are imported because of unions — look at the great prices at Walmart.
Most stuff at Walmart is crap that falls apart within a year. Most products are not imported either, even if Walmart is full of “Hecho in Chine” products.
What happened to steel production, in the US?
Other than some movement of iron smelting to overseas where the iron ore is (so that we import steel slabs now instead of iron ore and taconite pellets), steel production in the US is as robust as ever.
http://www.federalreserve.gov/releases/g17/ipdisk/ip_sa.txt
See series G3311A2, G3311A2P, G3311A2R.
Why is there outsourcing?
Because it is trendy nonsense from business school case studies. “If you don’t have a China strategy you are just so behind the times”, etc. If it makes so much sense, where is the prosperity and roaring stock market for the US since its widespread implementation during the last decade or so? Where are the booming profits for non-financial and non-oil/gas companies?
It seems to me we have accepted an economic system which holds down wages and income for the bottom 75%, and in return holds down purchase costs of clothes, toys, and basic consumer goods via use of cheap imports, and then hopes that food and energy prices also cooperate to keep the masses placated.
What electronics are made in the US? Textiles?
http://www.madeinusa.org/nav.cgi?data/elec
http://www.madeinusa.org/nav.cgi?data/clot
http://www.federalreserve.gov/releases/g17/ipdisk/ip_sa.txt
See series G313A4 (Textiles) G313 (Textile mills) and subsequent series for specific textile types, G334 (Computer and Electronic Product) G3343 (Audio Video Equipment) and subsequent series for other electronics.
Note the consistent downturn in 2001 with Bush 2.0 policies. Similar downturns can be seen in other Walmart/Home Depot/Bed Bath & Beyond type products like Hardware (series G3325), Small Electronic Appliance (series G33521), Electric lighting equipment (series G3351).
Manufacturing in most of these sectors was holding their own until this decade. Maybe we need to reverse the corporate tax policies set in place in 2001 that have incentivized outsourcing and led to flat employment and tax receipts and exploding deficits?
Maybe we need leading companies like WalMart to reconsider their “China only” obsession with the lowest posisble price that leads to having stores full of cheap junk?
Why are bridges so expensive, now — more than 20 times as in the past?
Because bridges are made with cement, steel, and aggregate, and the main factor in the price of those produts is the price of oil and iron ore which have done nothing but go up.
Why are public workers paid more than double for comparable work & output in the private sector. plus get huge pensions?
Because private workers have been told to fear the big bad union that used to get them high wages and benefits.
Caterpillar is one of the few great US manufacturers & exporters. It has come close to death because of unions & could do better without. “If it works in Peoria†— well, that’s another subject.
Oh hardly. There are lots of great US manufacturers and exporters and we export hundreds of billions of manufactured goods.
We have a goods and services trade deficit of $587 billion, and $476 billion of that is oil. We are a net exporter of everything except oil, consumer goods, autos, and computers. Net exports include food (+$20B), industrial supplies (+$190B), Capital goods except cars and ocmputers (+$55B), services (+$180B).
Try living w/out oil — don’t forget, not just your use, but any product that uses, including transport.
I already try to minimize my oil use. I own one car and do most of my daily travel on electric trains powered by hydro and nuke power. I have gas heat, not oil. My family uses personally about 110 gallons of gasoline per person year, and 3 gallons of propane per person per year, while the per capita rate for the US is 980 gallons per year. 48% of US use is gasoline, so if I take my pro-rata share of the other 52%, we are at 620 gallons per person per year. If you prefer to look at it on a family level, I estimate we use 2290 gallons per year vs. a family average of 2920 gallons. Either way, I am 20-35% under the average. If everyone were more frugal with oil like me, this country would be a wealthier place because we wouldn’t be shipping around $300B offshore to foreign oil producers every year. I personally calculate that I save about $3000 per year by my habits on oil, and another $3000 by owning just one car, which is around 12% of the average person’s disposable income. What would you do with an extra $6000 per year in your family?
I’m glad you brought up the Savannah. Savannah was a demonstration of the technical feasibility of nuclear propulsion for merchant ships and was not expected to be commercially competitive. She was designed to be visually impressive, looking more like a yacht than a cargo vessel. She performed well at sea, her safety record was impressive, her fuel economy was unsurpassed, and her white paint was never smudged by exhaust, she was a beautiful ship. However, Savannah’s cargo space was limited to 8,500 tons of freight in 652,000 cubic feet. Many of her competitors could accommodate several times as much. Her crew was a third larger than comparable oil-fired ships and received special training for nuclear operating, that’s fine for a stationary power plant not a ship. No ship with these disadvantages could hope to be commercially successful. Her passenger space was wasted while her cargo capacity was insufficient. The Maritime Administration decommissioned her in 1972 to save costs, a decision that made sense when fuel oil cost US$20 per ton. In 1974, however, when fuel oil cost $80 per ton following an energy crisis, Savannah’s operating costs would have been no greater than a conventional cargo ship. (Maintenance and eventual disposal are other issues. The ship’s historical namesake, the SS Savannah, which in 1819 became the first steam powered ship to cross the Atlantic Ocean, was also a commercial failure despite it also being an innovation in marine propulsion, she was later gutted and used to help lay the first Trans-Atlantic cables. Recently there has been renewed interest in nuclear propulsion, and some proposals have been drafted.
LazyReader, Yup, the Savannah was a demonstration of the technical feasibility of nuclear propulsion for merchant ships. It didn’t pan out. There are no nuke powered cargo ships. One would think that there could be.
Andrew,
True that lower labor can mean lower quality. Yes there are skills involved. The overpaid unions w/their disincentives & such requires much space to fully discuss. Why has the US been increasing imports for decades? Lower costs elsewhere.
Look at public unions, increasing taxes, borrowing & future liabilities, mostly via pension. Education spending has increased thrice in real terms since the 1960s, without better performance. Teachers & the administration erasing & changing scores is deplorable.
The problems w/US car-makers are not solely unions. Yes, management made bad decisions. Look at foreign-owned makers, even in the US; they have lower costs, much to do with less union power [or none].
I haven’t had a problem w/Walmart products or from other big-boxes. I rarely look at country made in. Can you find replacement products at other stores, which are made in the US? How about many electronic made in the US? Look at % made here; same for textiles too. Sometimes “made” is loosely used for “assembled.”
Good for you to reduce your oil use, if that’s your priority. Don’t forget about all the goods transport & products (food, cosmetics) that use oil.
Yes there are good exports from the US. (The NLRB is trying to hurt Boeing.) Unions have priced many industries out of domestic production. What % of goods (consumer & industrial) are made in the US? Unsure, but would roughly guess <1/3. (Might take a 15 minute search to get data.)
Andrew, Oh, a few other little things.
Hypocrisy to bu domestic: Did you notice that the bus used in Obama’s Magical Misery not Listening Tour was made in Canada? GE’s Jeffrey Immelt (one of BO’s cronys) is shutting down a Wis. plant & moving operations to China.
There is not necessarily a problem w/free or fair trade. Lookup comparative advantage. The problem can be in too much reliance on foreign sources, plus the accompanying buying of public debt, in the spending of trade deficit money.
The big switching in the GDP portions from producing to services is evident of problems, which is a normal transition for developed nations — as seen in Western Europe, Japan & the Four Asian Tigers, but it might too imbalanced, such as the US medical field being 18% of the GDP, about 1/2 higher than next. Services of lawyers are used way too much. Many choose more cosmetology services w/many frills & crap. (I save a lot in shaving my scalp.)