As gasoline prices passed $3.50 a gallon nationally, the politicking predictably kicked into overdrive. “There’s no reason we can’t get gasoline down to $2 and $2.50 a gallon,” said Newt Gingrich, who in February promised he would accomplish this via an agenda he called “Drill here, drill now, pay less.” Two days later three prominent Democrats, including Representative Ed Markey, called for President Obama to release oil from the Strategic Petroleum Reserve to lower gas prices.
The huge difference between the thinking of Republicans and Democrats disappears when it comes to gas prices. Both subscribe to the same dubious premise: we can lower prices by increasing supply. But over the past decade, such policies have had little effect on the global oil market. It’s time to change our approach: rather than trying to increase supply in a vain attempt to cut prices, progressives should be embracing policies that will reduce the amount of gasoline we use, thus reducing the impact of prices on household budgets and the national economy.
High prices this early in 2012 put us on track for a repeat of 2011, when Americans spent nearly $500 billion on gasoline. Last year’s increase in prices in effect wiped out the benefits of the $100 billion payroll tax cut. Now increased gas prices may affect the outcome of the presidential election. More crucial, they are hampering the economic recovery, and the growing costs of cars and fuel are driving middle-class budgets into the ground.
Last September I interviewed Darren Flenoy, a Northern California security guard who had lost his full-time job in 2008 and counted himself lucky to work part time seven days a week. Unfortunately, he has to commute 560 miles a week—so he spends an astounding 51 percent of his income on gas, insurance, car payments and tolls. A complicated set of economic realities trap Flenoy and dozens of other workers I interviewed last year for EnergyTrap.org, a project of the New America Foundation: they hold mortgages on houses far from low-wage jobs and own old and inefficient cars that force them to spend more and more of their income on gasoline—wreaking environmental as well as economic havoc. There is almost no limit to what Flenoy will pay to get to work. “If gasoline goes up to $5, I have to pay it,” he told me.
People should not be forced to pour their salary into a gas tank. We should have other ways to get to work and spend our income. Progressives should establish a new green agenda that takes the dialogue away from the empty promises of Republicans, who persist in the fantasy that more drilling will bring lower prices. We have much to gain if we make energy (and by extension the environment) a tangible pocketbook issue for the middle class. Instead of talking about abstractions like green jobs and green energy, candidates have to focus on greener rides—and greener wallets.
Three big policy initiatives could put families back in control of their money and their lives: a loan guarantee program for efficient cars, a set of incentives that involve employers in worker transit, and a reorientation of highway and transit funding to encourage innovation and choice in transit. As I’ll discuss below, these strategies—while markedly different from most of the green proposals under discussion—deliver large environmental, economic and political benefits quickly, while building a platform for deeper cuts in carbon emissions and larger markets for green services in the future.
The cost of owning and driving a car should be a major political issue. Republicans have spent the past decade talking about lowering taxes, while Democrats have put enormous effort into lowering medical costs; but most families spend more on their cars and gasoline than on either of these expenses. A family of four making $50,000 spends $7,900 on transit, according to Commerce Department figures. A survey of 2,000 households by EnergyTrap.org this past summer suggests that many households spend much more—more than $10,000, possibly because (as the survey showed) some lower-middle-income households actually drive farther to work, in less efficient cars, and spend more on repairs than their wealthier neighbors. Income inequality, a recent fixation of the political sphere, is deepened and exacerbated by the extraordinary expense of car ownership. And yet, in our current economy, going without a car is not an option for most people: a 2003 study by Harvard’s National Center for the Study of Adult Learning and Literacy found that owning a dependable car was a better predictor of finding and maintaining a job than having a GED. Policies that either reduce the cost of financing and driving cars or provide other convenient options for getting to work could free up thousands of dollars for struggling families—significantly more than tax cuts and perhaps comparable to raising wages.
Given the stakes, you would think policy-makers had already attempted to cut the cost of commuting through green initiatives. In fact, the opposite has been true. Bush and Obama administration policies for energy efficiency, green programs and even carbon legislation have been aimed at the poor (housing retrofits) and the well-off (the president recently proposed a generous $10,000 tax credit for buying a $40,000 Chevy Volt, even though GM estimates that the average Volt buyer makes $170,000 a year). This has left the middle, who have seen their access to credit restricted in the economic crisis, to muddle through. Many big-ticket items on Obama’s green agenda—high-speed rail, loan guarantees for start-ups—will probably not benefit the middle class for at least a decade. By failing to make the middle class beneficiaries of the green goodies, progressives have seen support for these important programs erode as Republicans rail away about “boondoggles” and “job killers.” Making the middle class the center of a green agenda by demonstrating that environmental values deliver real value—cash—to families will stimulate the economy as a whole and build a powerful green voting bloc for the future.
First, we need a federal auto loan guarantee program—similar in some ways to Cash for Clunkers—so that more Americans can buy cars that get more than 35 miles per gallon. For decades, it was easy to buy cheap, used “econoboxes” that used relatively little gas. But now, when gas prices are high, the cheapest cars in the used-car market are the gas guzzlers, while the prices of fuel-efficient vehicles have risen. At the same time, access to credit has dwindled, so many moderate-wage workers buy cars from “buy here, pay here” auto dealers who charge as much as 30 percent interest, and whose business depends on repossessing nearly a third of the vehicles they sell.
The combination of gas costs, financing charges and car repairs can be crippling. Last summer I spoke with Tammy Trahan, a single mom in New Hampshire who was spending about $600 a month on financing and repairs for a seventeen-year-old SUV and $500 a month on gas. She tried to keep up by taking on as many as four part-time jobs and by cutting back on food, after-school sports for her kids and even her prescription asthma medicine—which landed her in the ER. Trahan eventually got a car loan at around 5 percent interest for a fuel-efficient Toyota Yaris from a New Hampshire nonprofit called More Than Wheels. Her commuting expenses were reduced to $120 for gas and $297 for financing per month. She’s now financially solvent and saving to move closer to work. Getting newer, more fuel-efficient cars on decent terms into the hands of workers who need them makes a lot of sense. In ten years of operation, More Than Wheels has found that the average family saves $1,400–$2,400 a year on financing and repairs and $1,120 on gasoline. Fewer than 5 percent of its clients default—significantly lower than the average. And of course, its cars also use less gasoline and emit less carbon.
A federally backed auto loan program offering 5 percent APR loans for cars that get 35 mpg or more could transform many families’ finances, just as More Than Wheels improved Trahan’s. This is better than the stimulus programs suggested by either party, as it would increase middle-class disposable income by up to $3,500 while creating jobs in Detroit, and it would lower fuel imports and greenhouse gas emissions to boot. Done right, a loan program would cost considerably less, and do a lot more good, than the giveaways in 2009’s $2.8 billion Cash for Clunkers, the benefits of which went primarily to well-off households that qualified for credit when the recession was at its worst. Over the course of a decade, a carefully designed auto loan guarantee could create a robust market for highly efficient cars, encouraging manufacturers to innovate faster than the current fuel-economy standards require.
* * *
Families could save even more money if they had the option of leaving their car in the driveway or doing away with a second car altogether, but outside major metropolitan areas, only 1.2 percent of Americans take public transit to work. Here again, middle-income workers may be at a disadvantage. A 2011 Brookings Institution study found that existing mass-transit lines do a better job of connecting highly skilled workers to their jobs than they do for those in middle- and low-skill industries. One way to create more transit options for workers is to offer incentives to employers to develop van pools, car pools, telecommuting options and other creative initiatives to get their employees to and from work. One office park in San Ramon, California, has a program that gets one-third of its 30,000 workers to leave their cars at home, saving some families as much as $10,000 a year. Workers in the program like saving money, says transit coordinator Marci McGuire, but they also appreciate spending less time in traffic, feeling less stressed and having more time to exercise.
Most discussions about expanding transit options focus on more public transit or big-ticket infrastructure projects like high-speed rail. But creating incentives for employers to assist in transit offers faster results, and it’s considerably cheaper. In a detailed analysis for the Transportation Department, Cambridge Systematics estimated that employer-based commuter strategies could cut twice as many tons of CO2 emissions by 2030 as intercity bus and rail improvements, at about one-seventh the cost per ton, while saving money on gas. The point is not to discourage high-speed rail but to suggest other aggressive strategies that will immediately reduce gasoline dependence and expand commuter options.
Finally, federal highway funding is due for reauthorization, and in addition to fixing our faltering infrastructure and getting the Highway Trust Fund out of the red, lawmakers should reform our multibillion-dollar highway subsidy program to give Americans more freedom of movement and more transit choices beyond paying at the pump. Everyone from the Natural Resources Defense Council to the CATO Institute has bemoaned the perverse incentives of current highway subsidies: states that use the most oil are rewarded, income taxes from the general fund end up subsidizing oil-guzzling development schemes and successful mass-transit programs end up subsidizing unsuccessful ones. (If you think government farm subsidies for high-fructose corn syrup are a nightmare, highway subsidies will turn you into an insomniac.) Recently Congressional Republicans voted through a rewrite of the transit bill that increases oil dependence by funding highways with future fees from oil drilling.
A progressive rewrite of the highway bill should reward communities, highway projects and transit initiatives that hit benchmarks for moving people with less oil. One such proposal, by the Pew Center on Global Climate Change, contains national, state and local targets for oil savings, allocating funds based on whether projects achieve reductions in fuel use while providing funds to increase car-pooling and van-pooling. The next highway bill should also encourage the kinds of innovations—and businesses—that give transportation users more choices. Of course, this should include traditional city-run train and bus systems, but it should also make room for new players, such as private entrepreneurs who find ways to provide services that give workers more options. Our current system of funding creates what technologists call “path dependency” on oil—you can get to work any way you’d like, as long as it’s by driving your own car. The next bill should work toward creating a sort of transit supermarket. Every commuter should have a range of choices, including, perhaps, a for-profit van pool, a rideshare program, a city/employer bus with Wi-Fi and a schedule that allows the employee to telecommute two days a week or the option of working from a satellite office.
In the long term, we need higher road-use fees and higher taxes on fuel to fund our highway infrastructure and reduce carbon emissions. But we can’t do that until we have a way for lower- and middle-income households to respond to higher gasoline prices by reducing consumption. The policy ideas I’ve outlined here—auto loans, employer incentives and mobility supermarkets—are effective transitional strategies, with the potential to forestall the recessionary impact of high gas prices and to stimulate the economy. But they also provide the foundation for long-term environmental and economic sustainability.
Progressive policy-makers should give American families the keys to escape the trap of gasoline dependence. Shifting the dialogue away from “drill, baby, drill” by giving commuters more choices could profoundly change the way we use oil. It also has the potential to overthrow the stale demagogy of energy. When people can say no to expensive gas in their daily lives, when they can choose how to get to work, they will not be interested in politicians who claim to be their low-price saviors. They will not fear oil speculators either, because what makes oil speculation possible is the chaining of Americans to the gas pedal. Policies that create green rides and green choices will give American workers a chance to be the ones driving change. And they will no longer be driven into the ground by the high cost of oil-only transportation.