Insightful commentary by Keith Hennessey on Obama’s fuel economy rules

by Marlo Lewis on May 20, 2009

in Blog


In this insightful, informative post, Keith Hennessey, formerly the senior economic advisor to President G.W. Bush, cautions that Obama’s new fuel economy rules could destroy 50,000 auto industry jobs. Yet the rules would have no detectable impact on projected global temperatures or sea level rise–all pain for no gain.

In addition, Hennessey notes that Obama’s action “will accelerate EPA’s regulation of greenhouse gas emissions from stationary sources.” He continues: “While Congress is futzing around on a climate change bill, EPA is getting ready to bring their “PSD” monster to your community soon.” He concludes:

In effect, EPA could insert itself (or your State environmental agency) into most local planning and zoning processes.  I will write more about this in the future.  It terrifies me.

Well, it worries me too. Politically, however, there may be a silver lining in this dark cloud. Concerning which, I posted the following comment on Keith’s blog.

Excellent analysis, Keith. Yes, the PSD monster is a big part of this story, which most media coverage has missed. It will spring to life the moment EPA finalizes the new GHG/Fuel Economy standards by making carbon dioxide a Clean Air Act-regulated “air pollutant.” In addition, the endangerment finding that underpins the standards will substantively satisfy the test, in Section 108 of the Act, that initiates a NAAQS rulemaking. The Center for Biological Diversity and many other warmists argue that NAAQS for CO2 should be set at 350 parts per million. Even outright de-industrialization of the United States probably would not suffice to attain such a standard.

The looming prospect of an era of litigation-driven Clean Air Act regulation is an important subtext of the debate over the Waxman-Markey cap-and-trade bill. Proponents are pursuing a legislative extortion strategy. Their not-so-subtle message: Support the bill (which precludes greenhouse gas regulation under the PSD, NAAQS, Title V, and HAP programs, although not under NSPS and Title II), or we’ll sic EPA and the eco-litigation lobby on the economy.

My big fear is that Republicans will panic and provide Obama-Waxman-Markey bipartisan cover for cap-and-trade. Republicans need to clear their minds and realize that, with a modicum of courage and discipline, they can turn this threat into an opportunity. Although intended as a legislative hammer, it more nearly resembles a political suicide note.

In effect, Team Obama and Waxman are saying, “You had better provide us with bipartisan cover to raise gasoline prices and destroy jobs, or we’ll sic EPA on the economy, and won’t you be in trouble with your voters then when EPA raises their energy prices and destroy their jobs!” Cap-and-trade Democrats are setting the stage for a political backlash that Republicans can later exploit. All Republicans need to do now is keep opposing cap-and-trade as an energy tax, and keep saying that Congress never intended for the Clean Air Act to morph into Kyoto on steroids.

Once moderate Democrats realize how the extortion strategy could backfire, many may jump off the cap-and-trade bandwagon. Some may even support separate legislation to preclude greenhouse gas regulation under PSD, NAAQS, etc. 

Obama officials are already trying to hide behind Mass v. EPA, claiming ‘the Court made us do it.’  This excuse won’t wash. President Obama can protect consumers, jobs, and the economy from EPA regulatory excess any time he wants just by introducing stand-alone legislation to exclude carbon dioxide from regulation under PSD, NAAQS, etc.

Obama has not done so, because he is unwilling to let Waxman-Markey succeed or fail on its own merits. He wants the prospect of regulatory chaos to herd Republicans into the cap-and-trade corral. But Republicans can turn this weapon against those brandishing it just by refusing to share responsibility for policies they oppose. 

Irony of ironies, Mass v. EPA unexpectedly gives Republicans an opportunity to clarify party differences and hold Democrats accountable for the economic fallout from either cap-and-trade or Clean Air Act regulation.

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