Kill CAFE before it kills GM

Fellow owners of General Motors Corp., should we let the government get away with this?

The Obama administration and Congress seem bent on killing "our" company with absurd fuel standards.

And this so soon after rescuing GM with bailout and bankruptcy. And hauling us, the taxpayers, kicking and screaming into a substantial part-ownership, costing about $50 billion. Unlike true shareholders, though, we'll never collect dividends. Break even, get repaid and get out is the best we can hope for.

Washington's policy makers really are the wrong way on a one-way street with this one. Environmental extremists and a compliant news media are cheering all the way, too, foolishly enough.

The government's about to adopt new CAFE requirements, for Corporate Average Fuel Economy, by 2016. All auto makers selling in the United States will have to get 35.5 miles per gallon as an average across all their models.

A level playing field• Not quite, says car-watcher Alan Reynolds. Toyota, Hyundai and Volkswagen should be rubbing their hands. But not General Motors. Reynolds, a researcher at Cato Institute, the libertarian think tank, laid out the absurdities in a Wall Street Journal column.

He said Asian and European automakers will have no trouble meeting stingy fuel standards. They're old hands at small cars for their home markets. General Motors, not. It does make decent subcompacts but makes all its money on big cars, sports cars, trucks and sport utility vehicles. More petite and "greener" products in its design pipeline won't substantially change the pattern, Reynolds argues.

Here's the irony. With lower average miles-per-gallon numbers, Toyota, Hyundai and others will still be able to sell plenty of luxury cars, trucks and SUVs, very likely taking market share from our own hapless biggest of the Big Three. A related irony: India soon will produce the Jaguar; a Chinese company, the Hummer. Too big for Americans to handle.

So kill CAFE before it kills GM, says Reynolds. Go for real "green" by spurring sales of smaller vehicles in two ways: extend the federal excise tax on gas guzzling cars to trucks and SUVs as well, and equalize fuel taxation.

Right now, he says, the federal tax at the pump is highest on the most efficient fuel — diesel. And it's lowest on the least efficient (but politically blessed) ethanol. Cars get 30 percent better mileage on diesel than gasoline, says Reynolds. And engines drinking mainly gasoline get 30 percent better mileage than they would on 85 percent ethanol.

In effect, special interests are distorting consumer choices that might actually go "greener" than we might expect. "Economically literate environmentalists" should help make the case against the CAFE fetish, says Reynolds.

He admits relying on taxes at the pump isn't the ideal way to influence the market. But it's better than "harmful regulations." And could get General Motors off our hands and on its own two feet.