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Cato Daily Dispatch for November 20, 2002

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White House Considers Improved SUV Fuel Efficiency
EU Ready to Take U.S. to WTO Over Trade Concerns
Group Says Health Care System in Crisis

White House Considers Improved SUV Fuel Efficiency

Amid simmering debate over U.S. dependence on Middle East oil, the Bush administration is considering a proposal to require sport-utility vehicles and other light trucks to achieve higher rates of fuel efficiency. The move would be the first increase in such government-mandated targets since 1996, according to The Wall Street Journal.

Top regulatory officials are reviewing a proposal drafted by the National Highway Traffic Safety Administration to raise standards by roughly half a mile a gallon each year in the 2005-2007 model years -- or a total of 1.5 miles a gallon by 2007. Although it remains in draft form and could be drastically rewritten, it is likely to encounter strong resistance from auto makers, officials familiar with the plans said. But the agency has based its plan on data submitted by Detroit's Big Three auto makers themselves, one of the officials said.

NHTSA is required by law to annually set federal fuel-economy standards for light trucks, and officials began looking anew at current rules when Congress began debating a comprehensive national energy policy earlier this year. Under the law, if NHTSA proposes an increase in fuel-economy standards, it must give auto makers at least 18 months to make design changes. For 2005-model year vehicles, that means the agency would have to issue its proposal by April 1.

In "Leave Those SUVs Alone," Director of Natural Resources Studies Jerry Taylor writes that a fuel efficiency mandate is wrong as it would actually persuade people to drive more because it would reduce the cost of driving.

"Energy economists who've studied the relationship between automobile fuel efficiency standards and driving habits conclude that much of the projected fuel savings from such mandates are offset by increases in vehicle miles traveled," Taylor argues. "Make it cheaper for me to drive to the beach and I'll drive to the beach more frequently than I might have otherwise."

EU Ready to Take U.S. to WTO Over Trade Concerns

The European Union said today it was ready to take the United States before the world's trade body if cooperation failed to resolve a number of EU concerns over trade barriers imposed by Washington, Reuters reports.

Presenting its annual report on obstacles faced by European exporters and investors in the United States, the EU's Executive Commission said it would go to the World Trade Organization to protect the rights of companies.

Among the main concerns highlighted by the commission were tough new U.S. security measures imposed after last year's September 11 attacks as well as Washington's failure to comply with a number of WTO rulings.

"Congress should support ongoing WTO negotiations to liberalize global trade in agriculture and services," writes Brink Lindsey in the Cato Handbook for Congress. "If successfully concluded, those talks could open vast new markets for American exports, raise global welfare by hundreds of billions of dollars, and help protect American consumers from trade-distorting barriers here at home. Congress can encourage a successful new round by refraining from passing any new market-distorting farm bills and by enacting unilateral trade liberalization, including reform of America's draconian antidumping laws. A U.S. willingness to liberalize would set a good example and build goodwill for a more comprehensive agreement."

Group Says Health Care System in Crisis

The National Academy of Sciences said yesterday that the U.S. health care system was in crisis and that the Bush administration should immediately test possible solutions, including universal insurance coverage and no-fault payment for medical malpractice, in a handful of states, reports The New York Times.

Administration officials said the report would probably become a blueprint for pilot projects to be proposed by President Bush and Tommy G. Thompson, the secretary of health and human services, who requested the study.

"The American health care system is confronting a crisis," said the report, from a panel of experts appointed by the academy's Institute of Medicine. "The health care delivery system is incapable of meeting the present, let alone the future, needs of the American public."

The report cataloged the problems this way: "The cost of private health insurance is increasing at an annual rate in excess of 12 percent. Individuals are paying more out of pocket and receiving fewer benefits. One in seven Americans is uninsured, and the number of uninsured is on the rise."

The Cato Handbook for Congress recommends that Congress offer a simplified set of flexible medical savings account options to all Americans; provide a fixed-dollar tax credit option to taxpayers who purchase health insurance; expand consumer choices that increase market-based accountability by health plans, instead of enacting a patient's bill of rights; and fundamentally restructure Medicare to expand competitive private health plan choices.

Jonathan Block, editor, jblock@cato.org