As an employment strategy, making service vehicles efficiency leaders will definitely provide business owners with savings when gas prices are high, and more important, prevent them from feeling insecure: like they have to "bow down to the pump." This, coupled with other improvements in the economy, could encourage business owners like Brent to bring in another employee.
How to do this? The US approach to vehicle efficiency is limited to either regulatory showdowns (like the upcoming struggle over whether to increase CAFE by 3 percent or 6 percent) or X-Prize type contests. When lawmakers give tax incentives for green cars, they end up giving tax breaks to the people who make over $100,000 a year and can afford a Prius or a Volt--or an increased gas bill. What we need is an approach that allows a competitive market to develop. And at the moment, the market is focused on the consumer vehicles, where the juicy tax breaks are.
I think we need a fundamental change. Rather than tax incentives, the government should offer credit--low- or zero-interest auto loans--to purchasers of the most efficient cargo vehicles. The Small Business Administration, which already has years of experience providing loan guarantees to banks, should be the initiator. For small business owners, getting very-low-cost loans for vehicles saves them a lot of money, because they don't have to get commercial loans with high APR's. For the taxpayer, this scheme has benefits because, unlike Cash For Clunkers, the money is returned to the treasury in the form of loan payments. In effect, the government is helping businesses pre-pay for energy efficiency and pay it off over time, rather than paying unpredictable gasoline prices over time. This has multiple positive effects for the economy.
Increasing the fuel efficiency of fleet vehicles refocuses dollars from gasoline (which provides relatively few jobs) towards manufacturing more efficient engines, which provides jobs with multiplier effects. A 2005 study published in Energy Policy (pdf) found that aggressively increasing fuel economy for cars would result in a net gain in jobs, though it would also involve lots of upheaval. Interestingly, the five states with the most to gain from such a move are also states that currently have relatively high levels of unemployment: Michigan, Ohio, California, Indiana, and Illinois. Under the (much larger and longer term) scenario proposed in the study, those five states alone would gain more than 150,000 jobs by 2020.
Finally, starting a program to aggressively increase the fuel economy of fleet vehicles sets a precedent for pushing more technology into the vehicles that get the heaviest use. Using government loan guarantees to stimulate a market for electric, natural gas, hybrid, or other innovative vehicles will benefit the country as a whole, and small business in particular, but the money will be repaid to taxpayers. It will provide an incentive to Detroit to move faster, without the partisan deal making, or tax credits that distort markets. Investing in engines rather than gasoline has other benefits as well. For one thing, burning a gallon of gasoline imposes many social costs: it creates pollution which creates health care costs, produces greenhouse gases, refining and shipping carries risks of spills in water and air, and dependency upon some foreign suppliers of oil has military and foreign policy implications.
Unfortunately, "bowing down to the pump," has become a habit for policy makers, but we absolutely have to find a way to lower the impact of gas prices on our economy, and particularly employment. In that survey of small business owners, 38 percent said that gas prices could threaten their ability to be in business. There may be some hyperbole in those numbers, but can we afford to take chances with the oil market?
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