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Hell Freezes Over! Somebody on Fox Backs Tax, Government Action!

Reported by Judy - April 22, 2006

Has hell frozen over? A die-hard free market Republican on Fox News' "Bulls and Bears" on Saturday (April 22, 2006) suggested the federal government hike taxes on gasoline and use the money to build the infrastructure needed to break America's addition to oil.

Tobin B. Smith, of changewave research, was the leopard who changed his spots, arguing that gas will soon hit $5 a gallon and it is time for the nation to act by switching to ethanol-fueled cars and other alternative fuels. He proposed a $3 a gallon tax on oil and a massive government program, such as the post world War II Marshall Plan for European reconstruction or the 1970s Fannie Mae loan program for housing, to create the infrastructure needed for alternative fuels -- pipelines, production facilities, refueling stations, and so on. Americans won't change their dependency on foreign oil until gas hits $6 a gallon, he said.

Gary B. Smith of Exemplar Capital stuck to his free market guns, claiming, "I think it’s time that someone out there, some smart entrepreneur, start searching for alternatives. I don’t think it’s the government’s place to decide, just like they didn’t decide for our economy to move from the horse and buggies to the Model T or Model A, whatever was the first car. I’m looking for either the auto companies or some entrepreneur. Where’s the solar powered car, where is the hydrogen pwered car? As these prices get higher, there will be an opportunity for alternative energy, an alternative automobile. It will spring up and it will come from private industry."

Show host Brenda Buttner then claimed that such cars do exist, but "consumers don't want them," ignoring slow, but steady growth in hybrids.

Unfortunately, Pat Dorsey, of morningstar.com, the show's resident liberal, agreed with her. "The bottom line is that consumer demand simply isn’t there. The Prius is selling well, but it is pretty much a niche vehicle. You just haven’t seen either Detroit really commiting the resources behind this or individuals wanting to buy them," he said. He also said that moving to ethanol can happen, but it will take a long time and cost a lot of money "and by then oil prices might very well be back down to $40 to $50 a barrel."

OK, this is hard, but I can do it. I'm going to agree with Tobin Smith. Maybe not on all the specifics of his proposal, but on the general concept that government needs to take an active role in reducing the nation's dependency on fossil fuels, not just foreign oil and not just oil. But I wonder, why now? Why didn't more people like Tobin Smith come around to this idea years ago? Environmentalists have seen saying for decades now that the supply of oil is finite, prices will inevitably rise over the long term even though there will be some short term ups and downs, and that there are viable alternatives. But Republicans funded by big oil have fought tooth and nail to maintain the status quo and prevent government from making a serious effort toward change.

Yes, there has been some government funds for research and development, but the nation has refused to tighten automobile fuel efficiency standards and instead has allowed auto makers to build bigger, more powerful cars that actually use more gasoline than the ones sold ten years ago.

Gary B. Smith's idea that private enterprise can somehow get us out of this mess that private enterprise has created is nonsense. Government actually did play a big role in helping the nation go from the horse and buggy days to the automobile economy. Who does he think built the roads that made automobile use feasible? (And by the way, Gary B., the Model T was not the first car, not by a long shot. It was the first mass-produced American car sold at a price that the masses could afford.)

And Dorsey's claim that Americans don't want fuel-efficient cars is just nonsense. Why is GM going broke? Could it be because it's head-in-the-sand management insists on selling gas-guzzlers as the price of gasoline inevitably rises? GM had an electric car program, but cancelled it a few years ago rather than stick with it. GM does sell fuel efficient cars, but doesn't market or promote them, so how would consumers know to demand them? In San Francisco, GM's billboards promote the Denali, an SUV that gets 16 miles per gallon in the city and 22 on the highway. Who in San Francisco is going to buy a Denali for $47,000, pay $120 for a parking space on top of their sky-high aparatment rents, and then get only 16 miles to the gallon (probably more like 8 mpg with all the hills there)? Why doesn't GM use its billlboard space in San Francisco to promote cars that people who live there might actually buy -- something small and fuel efficient, which GM makes but never advertises. Why would GM management do such a stupid thing? Because it's much easier for GM to blame the unions for its problems than to face up to its own shortcomings.

Overall, the experts on this show were woefully ill-informed about the energy problem, especially as it relates to the auto industry. Several made references to General Motors, apparently ignorant that Ford has been the U.S. leader on this, currently selling cars with Toyota's Prius' technology. Even when they spoke of GM, they were often wrong. Scott Bleier of hybridinvestors.com mentioned that in Brazil, GM now sells cars that can run on 85 percent ethanol. That technology is available on GM cars sold in the U.S. as well, if you read the fine print of the Denali promotions.

The show was disappointing, even though Tobin B. Smith, who has long been promoting solar-related stocks, endorsed some positive steps. The liberals such as Pat Dorsey and Danielle Hughes, of Divine Capital, were uninformed. Gary B. Smith is stuck in the old economy and old world-view that says private enterprise can fix it.
It was a grim reminder of how slowly things change when big money -- oil companies and foolish auto companies -- don't want them to.

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