Close window  |  View original article

More Government-Required Gold-Plated Autos

Why must we pay for features we don't want?

By Will Offensicht  |  December 10, 2010

The US government is about to require that auto makers spend an estimated $2.7 billion per year to save an estimated 104 lives.  That works out to about $26 million per life saved.  As a side benefit, the regulation may prevent an estimated 7,800 accidents.

This is another of those tear-driven laws which adds so much cost to our economy.  The Wall Street Journal reports that back in 2002, a two year old named Cameron Gulbransen was killed when his father backed up the family car and ran over him.  In 2008, after merely three times as long as Cameron's entire life, Congress passed a law named after him which required bureaucrats to draft rules on rear visibility in vehicles.

The mills of government ground steadily forward, and on Dec. 3, 2010, the Transportation Department proposed that starting in 2012, all cars, pickup trucks, minivans, and buses would have to have a rear-looking TV camera.  They estimate that the unit would cost about $200 per vehicle.

Tough Cases, Bad Law, and Expensive Meddling

Young Cameron's death was certainly tragic, but this is an absurdly expensive response.  Assuming that the government's estimates of cost and of lives saved are correct, which they usually aren't, we can save lives much more cheaply in other ways.

Bill Gates, for example, has funded malaria research which promises to save lives for 25 cents each.  That's not a typo, the cost of curing a malaria patient is estimated to be twenty-five cents, the fourth part of one dollar.

The Journal article about back-up cameras ended:

The rule could cost the auto industry between $1.9 billion and $2.7 billion a year, according to regulators' estimates, unless auto makers can pass along the expense to consumers. [emphasis added]

The Alliance of Automobile Manufacturers, the industry's main trade group, said it was reviewing the proposed rules.

Not even the Wall Street Journal is immune from the mental error of thinking that auto companies pay for whatever regulators may see fit to require.  They noted that the cost would be high "unless auto makers can pass along the expense to consumers." 

When will the Journal realize that when a business makes a profit, that is, it takes in more money from its customers than it costs to run the business, customers pay for everything?  Every last cent of every single cost is passed on to customers, including the employer's share of employee's income taxes - including, in fact, every penny it costs to keep employees on the payroll.

Every penny of the cost of these cameras will come out of customers' hides.  Forcing cars to be more expensive will mean, by definition, that people have less money to spend on other things.

But I don't want a gold-plated car.

This isn't the first time that customers' wallets have taken a beating from misguided auto safety regulators.  Consider air bags.  They were supposed to save about 5,000 lives per year.  Instead, they ended up saving about 400 lives per year.

Air bags cost about $100 and each vehicle has a minimum of two.  The North American market is about 10 million units per year.  20 million air bags @ $100 cost about $2,000,000,000 assuming the car companies don't mark them up, which is unlikely.  Saving 400 lives with air bags costs car buyers at least $2 billion per year.  Is it morally justifiable for Americans to be required to spend $5 million dollars per life saved by requiring airbags?

Our lawmakers evidently feel that it's perfectly fine: they're about to require consumers to spend about $26 million per life saved by requiring rear-mounted TV cameras on top of the millions already spent on air bags.

Slice Regulation, Not Just Taxes

The Tea Party activists are correct in demanding that taxes go down, but they also have to force regulations to be pruned back.  Complying with regulations costs about 14% of GNP compared with the 21% of GNP spent on paying federal taxes.

Regulations cost us more than half as much as we pay in taxes.  It's important to whack back tax rates, but it's every bit as important to eliminate whole regulatory departments.  In some ways, it's more important, because you get a double whammy: eliminate the bureaucrats and you save their salaries and the costs of the regulations they no longer impose.

Meddling government got away with costing us $5 million dollars per life saved with air bags, so now it will cost us $26 million per life saved with TV cameras.  When and where does it stop?  If the past is any guide, it won't stop until we elect a Senate and a Congress who're committed to cutting regulation in addition to cutting straight-up spending.

"Regulated Enough Already" isn't as nifty a slogan as "Taxed Enough Already", but it's equally important.