The Auto Industry Wants Your Thanks

Feeling warmer and fuzzier about the auto industry bailout? With the help of the Obama reelection campaign, the industry is convincing more Americans that the $80 billion they forked over to save it were dollars well spent.

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In the latest Pew poll, the public responded more positively toward the bailout than ever before, with 56 percent of Americans agreeing that it was “mostly good for the economy.”

It has taken hard numbers to soften up taxpayers — numbers like the 1.4 million new cars sold in March that made it the best month for car sales in five years. Looking to capitalize on this momentum, a key auto industry association, the Center for Automotive Research (CAR), has published a report that credits the industry with contributing $135 billion in tax revenues to the feds and the states.

(The irony must here be noted that CAR receives 43 percent of its funding from federal, state, and local sources. Yes, this research about how the auto sector partly funds the government was partly funded by the government.)

Sales taxes; fuel taxes; property taxes; licenses and fees; income taxes paid by industry employees; and corporate taxes paid by automakers, suppliers, and dealers were tallied by the group. On the face of it, these numbers are impressive, representing on average 13 percent of state revenues. States in which automakers have significant operations can see much higher percentages; in Tennessee, for example, industry-related dollars approach 20 percent of revenues. For these states, being dependent on an auto industry on the upswing seems like a very good thing.

That is, until they start adding up the year-in, year-out costs imposed by the industry and borne by the public. A truly comprehensive accounting of the economic costs of car dependency might include everything from highway litter pickup (Missouri alone paid $5 million for this in 2011) to the price of the Afghanistan and Iraq wars, estimated at $3.2-4 trillion overall.

But this is hardly necessary. To blow the industry’s $135 billion boon out of the water, just a few line items will do, such as:

These few costs alone total $661 billion, roughly five times CAR’s touted $135 billion.

Even Tennessee’s $1.87 billion tax haul from the industry disappears in just two bites: $1.2 trillion in health care costs from crashes in the state and $809 million in costs to drivers from wear and tear due to poor roads.

$135 billion a year sounds like a lot compared to $80 billion for one little bailout, and that’s what this report was intended to convey. But in the context of what Americans pay to help the auto industry keep selling us cars, it’s like getting a $5 gift card for Tiffany’s: not worth a thank you note.

Anne Lutz Fernandez, a former investment banker and marketing executive, is co-author, with anthropologist Catherine Lutz, of Carjacked: The Culture of the Automobile and its Effect on Our Lives.

  • Long-Time Berkeley Resident

    You forget the main cost: most people who live in American cities have to pay for a car and for gasoline just to be able to leave their houses.  People who live in Amsterdam don’t have this expense, because they live in a city that lets you get around by bicycling.

    Technically, if you wanted a full economic accounting, you would have to:

    — Begin with the fact that the income generated by automobile use is equal to the cost of automobile use (basic economics: Say’s law)

    — Correct for the cost of our net imports of cars, oil and other associated imports (costs paid by Americans, but income goes to other countries).  This would leave us way behind.

    — Add on external costs.  This would leave us much further behind.

  • Anonymous

    While I completely agree that our car culture imposes immense costs that are hidden or ignored, I think that conflating these issues with the auto bailouts is problematic.

    While certainly not unrelated, I think that the issue of the auto bailouts is, to an extent, separate from that of our overall car culture. I would argue that even if we had allowed American auto manufacturers to go belly-up, this would have likely had little impact on our overall auto use. Very, very little clothing is made in the U.S. anymore, but that doesn’t mean we go around naked. Foreign automakers would have been happy to continue providing whatever cars and trucks the American market cared to consume. This wasn’t a question of how much Americans drive or whether cars get made, but rather where they are made. Until we make some more fundamental changes, our culture, built environment, infrastructure priorities, and land use choices will continue to dictate the American appetite for autos.

    Our choice with the bailout was not between keeping American automakers afloat or decreasing societal costs of the automobile. The real question was: In our current transportation context, would it help the U.S. economy to maintain stateside auto manufacturing? Little affinity as I have for the car, I think the answer is still a resounding yes.

  • As much as I think we need to ween ourselves of oil and car culture, the cost of importing oil isn’t really as big a deal as it’s often made. I would much rather us invest in good bicycling infrastructure and energy alternatives but:

    America has the best crude oil refining capacity in the world. Just going off what I remember, but if we only imported the crude oil we needed for internal use, we could easily do so without having to deal with questionable regimes. In fact, I believe we could meet our gasoline/refined oil needs using only crude from ourselves and Canada.

    The reason we import so much of it, often from questionable sources, is because we make a killing refining it and re-selling it to Europe and other countries. It’s also why I find the argument that we invade countries for oil so odd, as we’re perfectly fine buying mass quantities of oil from Saudi Arabia and Venezuela without batting an eye at their regimes.

  • fj

    Your thinking small does not serve the world
    Grid lock has to be replaced by action

    Jennifer Granholm’s Rousing Call To Action On Climate:  Get Political To ‘Allow Your Children To Have A Future’

    The mature and cash rich fossil fuel industry makes $5 trillion per year while getting $0.5 trillion in subsidies, has between  $9-$15 trillion in infrastructure which costs $1.5 trillion to maintain each year.

  • Anonymous

    I want to support this kind of critical journalism because there are so many negative externalities and hidden costs imposed by our auto-centric culture, but it’s sort of embarrassing when articles like this are published.  This article represents a mixture of cherry picking and economic disingenuity (or perhaps naivete?)

    Comparing the direct tax revenues generated by the auto industry to indirect costs that are imposed by car travel is not even apples and oranges, it’s like apples and … something that’s not even a fruit.  You could conceivably try to compare tax revenue to direct govt expenditure (which is not done here), but even then …

    The costs listed above are total costs, when they should be the marginal cost of using cars vs. some other mode of transportation.  There would be some health related issues if we replaced all the car trips with train and roller skate trips, just as there would be some amount of lost time and infrastructure maintenance regardless of mode.  And even then …

    If the government is paying more to provide auto use than the associated tax receipts, that does not necessarily imply that auto use is a net negative for society.  It just means that enough of the benefits are privatized that the government is effectively transferring value from taxpayers as a whole to car owners and drivers. 

    Being able to travel is a good.  Our collective decision about how we travel has been skewed by government transfers to car drivers in a such a way that we use cars more than we would (and other modes less) in the absence of these transfers.  But that doesn’t mean that cars are bad for society in the absolute sense, just that there is a more optimal mix of transportation modes that we could (and would in the absence of certain govt. policies) use.

  • Davistrain

    Having had my consciousness raised about “car-centric culture” in the US, I sometimes wonder, how did Americans work themselves into this situation?  There seems to be a subtle belief (especially among us older folks) that “Real Americans drive cars and live in single-family homes (the larger the better for both items).  Apartments are for the young and unattatched, buses are for poor people and bicycles are for foreigners and college students.  And let the next generation worry about sustainability.”  Do we really like our current “lifestyle” or did we fall victim to the propaganda of the automobile and real estate industries?

  • Isaac B

    Like it or not, the auto industry counts for a major part of out GDP. As we try and clean up the mess that auto-dependence and auto-centric urban design has left us, activists have a delicate balance to maintain. On the one hand, we want a long-term, sustainable quality of life (multi-modal, supporting walking, cycling and transit in addition to cars). On the other hand, the industry has cars to sell, roads to build, farmland to subdivide. Reducing the number of miles driven, means fewer cars sold. Fewer cars sold means fewer people working in the auto industry, ie, dislocation. The more obvious the wins of the bike/walk/transit advocates, the larger that threat looms. The industry wouldn’t hesitate to paint advocates as wanting to put hard-working Americans out of work. (It would not matter that the same industry has laid people off or shipped jobs abroad for its own reasons. PR firms seem to have a way of making people not notice that.) So, either advocates have to muster more firepower (people, dollars) than the auto (and related) industry can (an unlikely scenario) in the near future, or advocates need to be surgical and strategic in picking their battles, and to frame it as wins for all. (Note: It’s naive to believe that the auto industry could just retool to produce “appropriate” products, even with government support. Also, a significant portion of the American public will continue to want or need cars and would not take kindly to being told that it would be more “appropriate” for them to walk, bike or take transit. Billions (if not trillions) of dollars went into creating “car culture”. It will take at least that amount to undo it.

  • John Wirtz

    If you think not bailing out the auto industry would have eliminated all crashes, roadway maintenance costs, congestion, etc., you’re crazy.

  • Guest

    If you are going to include the cost of auto crashes, traffic congestion, etc; you must also include the economic value of having cars: how much would our food cost if it had to be transported by cart or bicycle from the ports and train depots to our grocery stores?

    Good analysis treats automobiles as a cost-benefit analysis over an ever expanding range of factors. This research only takes the costs and completely disregards the biggest portion of the benefit.

  • fj

    Guest, “disregards the biggest portion of the benefit”

    Cars and transportation systems based on cars are very bad designs.

    First and foremost they are very dangerous with annual global road accident kills exceeding 1.3 million and grave injuries exceeding 50 million per year; declared a world health crisis by the World Health Organization and Bloomberg Philanthropies supported by a donation of $100 million dollars by Michael Bloomberg; which should have raised a red flag immediately for a major change in human mobility.  Yes, monopolies — in this case transportation systems based on cars — can be very dangerous where power corrupts and absolute power corrupts absolutely.

    Second cars are extremely inefficient and expensive, especially including the requisite infrastructure and high-energy-density fuel required to move in excess of 1,000 pounds of steel, glass, and other materials per person.

    Third, automobiles are using the air as a toxic dump; frying the environment and one of the major causes of rapidly accelerating climate change which is the most important, dangerous, and daunting problem facing humanity at this very moment.  This should raise an even larger red flag with a pain producing warning siren at the same time.  Not understanding this is equivalent to believing that the earth is flat.  It is not.

    Global valuation of the services to humanity that the natural world provides are inestimable since the aggregate is unknown except that they are huge and beyond valuation since we are not even remotely close to being able to provide them; so let’s try to keep the valuation within comprehension:  How about $1,000 trillion?

  • fj

    Cars bring no benefits; as do many other antiquated ways of doing things.

    Responding to rapidly accelerating climate change, a clarion call may be rising to act at World War II speed and intensity on this crisis we have created.

    No one is suggesting that we have another world war with the typical end-of-war benefits to the victor; but, a  war of optimism perhaps; that World War III will be fought with sonnets expressly for our absolutely exquisite natural world and all peoples depending on it to live and ultimately prosper.


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