How the New CAFE Standards Could Help Detroit

Despite the dire warnings about the end of prosperity as we know it, there are reasons why auto executives joined Obama for his announcement of new CAFE (corporate average fuel economy) standards. I describe some of them over at the Guardian:

As hard as it might be for free-market fundamentalists to understand, automakers have openly welcomed a consistent, predictable standard they can use for planning and developing their products.

I offer some reasons why U.S. automakers might actually benefit from taking the market for smaller, efficient cars seriously. Foreign makers have been encroaching on U.S. makers by first introducing reliable small cars, and then moving into more expensive lines:

After Japanese makers gained a foothold selling small, inexpensive cars to Americans, they leveraged their strength in that segment to introduce a wider range of products, until luxury brands like Lexus were seen as superior to their US counterparts.

It's hard to see why automakers shouldn't be able to meet the new standards. Even though engines have been getting more efficient, average fuel efficiency actually dropped over a twenty year period, due mostly to the sale of ever bulkier vehicles.