The CBO's $7.5 Billion Brouhaha

By Bill Moore

Posted: 24 Sep 2012

When the U.S. Congressional Budget Office, otherwise known as the CBO published its report on the projected costs of the federal tax credit -- and other related programs -- to encourage the development and acquisition of plug-in electric vehicles, the media predictably rose in chorus, "Electric Cars: A Waste of Taxpayer Money."

They based this on the fact that at current gasoline and electric car prices -- the first, arguably, also subsidized by taxpayers to oil companies; the second admittedly high due to technology costs and low volume production numbers -- the current $7,500 tax credit still doesn't make EVs cost competitive. In fact, writes Ezra Klein in the Washington Post, "Even with the tax break, an average plug-in hybrid would still cost roughly $4,000 more over its lifespan than a conventional vehicle of similar size and performance.."

As a result, the CBO estimates that fewer than a third of a million -- far below President Obama's 2015 goal -- will be sold over the next seven years, meaning they will do little to reduce oil demand or cut carbon emissions.

Okay, I'll buy that. Of course, the report also noted that should the price of gasoline (which the report assumes would remain at $3.60/gal.) increase and/or electric car prices drop (largely by cutting the cost of their battery packs), their findings would have to be revised. Of course, both are big IFs, so it probably doesn't make sense to assume either will occur, which leaves the question, Are EV tax credits worth the cost or are they a waste of taxpayer money?

Look, you'll get no argument from me that $7.5 billion is a helluva lot of money by anyone's measure, except maybe United States Congress, which tends to think more in terms of hundreds of billions and even trillions of dollars (a trillion is a thousand billion, which is, in turn a thousand million). In fact, the Congress seems so inured to the cost of things they fund that during the previous Administration, they didn't even blink at the MONTHLY cost of fighting the war in Iraq.

Do you recall what the CBO estimated that little enterprise cost America's revolving credit card? Would you believe $9 billion a month? A MONTH!

Now, I ask you, which will prove the better investment? Funding technology that will ultimately reduce the nation's dependence on oil from corrupt, despotic nations and regions, at a fraction of the cost of a pointless, completely unnecessary war (in my view): a war that the CBO estimates will ultimately cost the United States something well north of a couple trillion dollars. (Pretty much all of it waged on credit, of course, so there'll be interest to pay, as well as the principle). And that's just the monetary tab. We're not even talking about property destroyed and lives ruined, both American, coalition and Iraqi. And if all this weren't obscene enough, the Pentagon reported that in the early months of the War, they couldn't account for up to $3 billion. It just went missing.

So consider the math. Based on the above CBO projection, I estimate the war cost something like $994 billion over eight years (2004-2011) plus two partial years in 2003 and 2012. By way of contrast, that much maligned EV tax credit and related programs costing $7.5 billion represents 0.0075 percent of the cost of the Iraq War.

Now ask yourself this: What did taxpayers get for the government's Iraq "investment"? A stable government in Baghdad? A reliable ally? A dependable source of petroleum? Or did we create a huge deficit and tens of thousands of wounded veterans, one of whom takes his or her life every 80 minutes? You be the judge: you and I and your grandchildren will be paying for it for decades to come.

And the $7.5 billion in tax credits on 21st century technology and jobs that give America a leg up on global competition? Worth the investment? Again, you be the judge.

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