July 14, 2008

Slowing to 55 MPH Could Speed us into Recession

By C. Edmund Wright

There is no better example of how out of touch Washington is with reality than the idea that our energy crisis can be addressed with a reduction of the national speed limit to 55 miles per hour. This is a classic sterile ivory tower academic type answer to a much more messy and complex question than politicians realize.

It sounds great on the surface. Simply drop 10 (more like 20 in reality) miles per hour and bammo....tons of found oil in effect. Wrong. What do these politicians (and New York cable financial analysts) think folks are doing out there on the interstates? They are not all just cruising around. They are doing what we call "commerce." You know, like trying to get produce to markets. Or making sales calls. Or delivering I-phones that are on back order. Or getting back home to have time with family from making sales calls or getting produce to market or delivering I-phones.

This reduced speed limit would have the effect of robbing most Americans of hours per year of time and productivity. Increased productivity that has propelled our markets to new highs in the last couple years. It would reduce the productivity of nearly every single truck driver, repair and maintenance crew, sales and marketing rep and in fact every single person and business who depends on transportation for their commerce. In other words, that means practically every single business in the country would take a hit. That inevitably means fewer jobs, reduced economic activity and lower tax revenues.

Take for example coastal industries. Turn a three hour drive each way into a four hour plus drive each way to get to the beach, and you'll see far fewer folks doing it for the weekend. Turn a 12 hour drive to the Florida or Carolinas beaches into a 16 hour trek, and the week long vacations won't happen.

In addition, for every penny of savings on the fuel front, we would lose dollars as hourly workers who handle transportation would instantly be something like 20% less productive. Commerce vehicles that operate close 75 mph now on the highway would spend many many hours more on the highway at 55. That will raise the price of every good or service talent that is being transported. This includes groceries, by the way. Not only would the trucking component of grocery costs go up even more, but more produce would be lost as the shipping time increase would by definition guarantee more lost to spoilage.

But no doubt, this idea will get some good play on Capitol Hill led by the anti-business liberals, the environmental lobbies and the New York based pundits and cable talkers. But worse than that, support will also come from many Republican lawmakers. When you jet around on the taxpayers and take limo's everywhere, you tend to forget what it is that makes life run outside the beltway. This will of course anger folks who own fleets and drive trucks and make sales calls....you know, the Republican base. (And we wonder why the Republican brand is in trouble).

It is symptomatic of the problem with government being run by too many lawyers and too many big city pundits and far too few business people and folks who understand what it is that actually happens in that part of the country known as "not New York" and "not D.C." and "not San Fransisco." It's as if folks exist in those liberal conclaves and have a Manhattan or Georgetown lifestyle and figure that the only time fossil fuels are burned are when redneck Republicans race off to go hunting, go to church, go to NASCAR events or go to Wal Mart.

It doesn't seem to dawn on them that the carbon footprints of the Big Apple and the nation's capital are themselves impressive -- not to mention the little fact that the commerce that allows investment dollars and tax dollars to flow to New York and Washington result from commerce going on outside the beltway and all of it requires fuel. If folks are not buying and selling and transporting, there is no money to tax....or to invest.

This was best demonstrated last week when Senate Majority leader Harry Reid whined (Phil Gramm was right) that

"...oil is making us sick....coal is making us sick...it's global warming and it's killing us."

Reid gets the majority of his votes and money from a little place known as Las Vegas, a resource-poor city that burns more energy and uses more water per capita 24 hours a day 365 days a year than almost any other city on the planet. This thought obviously never even dawned on him.

And these realities likely won't dawn on lawmakers and pundits in the coming days as they debate the 55 MPH speed limit. It will look good on the surface. The law of unintended consequences, like the law of supply and demand, will be ignored by politicians trying "to get things done" before they break to go campaign.

Not understanding those two laws got this country into this energy crisis in the first place. Now Washington will consider doing what Washington does all too often: making a problem they created in the first place even worse with the so-called solution.