Former Trump adviser alleges Trump caved to auto lobby on fuel economy rule

Source: By Abby Smith & Nihal Krishan, Washington Examiner • Posted: Thursday, June 25, 2020

 President Trump’s former chief economist says the White House backed off from plans to “totally rip out” Obama-era fuel economy standards because of pressure from car companies.

“I disagree with what the president did. I mean, he ended up protecting the car companies, which every president before has done, and he did it too,” said Casey Mulligan, an economics professor at the University of Chicago who served as the chief economist for the Council of Economic Advisers from July 2018 to June 2019.

“But he promised that he wasn’t going to do that,” Mulligan told the Washington Examiner. “He was going to drain the swamp, right?”

According to Mulligan, the Trump administration’s plan was always to gut the fuel economy standards, widely considered the Obama administration’s most influential climate regulation.

 But Mulligan, in a forthcoming tell-all book about his time in the White House, suggests Trump made the political calculation that it didn’t benefit him to gut the Obama-era standards. Instead, Trump compromised with the major car companies, which had been lobbying administration officials to revise the rule, he said.

That meant backing off a 2018 proposal to freeze the standards at 2020 levels, plans many of the car companies, including Ford and General Motors, publicly said went too far. In March, the National Highway Traffic Safety Administration and the Environmental Protection Agency unveiled their final rule, which requires automakers to improve cars’ fuel efficiency by 1.5% each year through 2026, rather than freezing them altogether. The Obama-era standards would have required a nearly 5% annual increase.

Other former and current Trump administration officials, though, dispute Mulligan’s account. They say automaker lobbying didn’t influence the final outcome.

“I never ever was told, nor did I have anyone at NHTSA receive a message that we needed to do something for the auto industry,” Heidi King, NHTSA’s former acting administrator, told the Washington Examiner. King oversaw the fuel economy rule-making before she stepped down in August 2019, after two years at the highway safety agency, a branch of the Transportation Department.

“We were always concerned with what’s the right thing for the people of the United States — fuel savings and safety and economic impacts, and all those statutory factors that the Clean Air Act and auto safety laws require,” she added.

King said she doesn’t think she even met with automakers at the NHTSA, although she said she did join White House meetings on the rule, along with EPA counterparts, “just to be present.”

After the fuel economy proposal’s initial release, automakers had resoundingly called for standards that increase year-over-year, raising concerns of a yearslong legal war with California and other states over the future of the standards that would create a bifurcated vehicles market. Making different cars for different markets across multiple states would be a logistical headache, as well as more expensive, the companies argued.

Auto parts suppliers had also warned freezing the standards would put millions of dollars of investment in fuel-efficient technologies at risk.

Mulligan, though, alleges automakers largely wanted the standards to keep increasing year-over-year because they benefit from them. He said he’d determined car companies were overcharging consumers for fuel economy compliance by $86 per ton of carbon dioxide.

That amount, according to Mulligan, represents the extra costs to consumers of automakers changing the technologies and design of their vehicles to be more efficient and lower-emitting. He calculated it by looking at the revenue Tesla received from selling greenhouse gas compliance credits under the standards.

Overall, the costs drove the average sticker price of a new car up by $2,900 for vehicles purchased between 2012 and 2016, according to Mulligan’s analysis.

In his book, Mulligan says he had intended to publish his findings in a Council of Economic Advisers report about the economic effects of deregulation but was rebuffed by other agencies, opposition he traces back to the automaker lobbying.

“The true secret was that the car companies want consumers to overpay for carbon abatement,” Mulligan writes in his forthcoming book You’re Hired!: Untold Successes and Failures of a Populist President. “In their view, the overpayment is a feature of President Obama’s rule, not a bug.”

Mulligan’s book is due out in September, but he provided the Washington Examiner an exclusive first look.

Mulligan suggests he started to get internal pushback because car companies or their allies got wind of his efforts and communicated their opposition to officials at the Transportation Department, the EPA, or the National Economic Council, or all three.

He recounts people at the National Economic Council said they wouldn’t allow the report to be released. Transportation Department officials told him the calculations were “fundamentally inaccurate,” and the Justice Department expressed concerns about releasing the figure before the final version of the fuel economy rule was released, he writes.

“For the first time ever, there were secrets that NEC and [the Office of Information and Regulatory Affairs] wouldn’t tell me,” Mulligan told the Washington Examiner. “They were very secretive.”

Amid those objections, Mulligan says in his book, he proposed to rewrite the report only to quantify the costs of the Obama-era regulations and leave out mention of the Trump rules. And while Mulligan says the Justice Department eventually gave its stamp of approval, the figure was never included in the final report, released in June of last year.

“It was clear to me that the car companies were rewriting the car rule,” Mulligan writes.

Larry Kudlow, director of the National Economic Council, disputed any insinuation he was influenced by the car companies, though. Instead, he blamed the Justice Department for blocking the release of Mulligan’s analysis.

“I was opposed to the car CEOs. I fought them every step of the way,” Kudlow told the Washington Examiner. “We had a strenuous debate with them, and my view was they were wrong.”

Kudlow said he “didn’t buy” automakers’ stated reasoning for opposing a freeze of the standards — that they didn’t want to make cars for two different markets.

Automakers had called for the White House to negotiate with California, which had long had the ability to set its own tailpipe greenhouse gas emissions standards stricter than federal levels. The Trump administration eliminated that authority in September, though California and more than a dozen other states, many of which follow its standards, are suing over that move.

Kudlow added that it’s “possible” the car companies wanted to use higher emissions standards as a reason to charge consumers higher prices like Mulligan alleges. “I don’t know what motivated them, but I think they made a big mistake,” he said.

Former administration officials say concerns about Mulligan’s analysis were rooted in timing and the technical details.

“As I recall, there was a discussion about methodology, consistency with the proposed rule’s regulatory impact analysis, and timing (as the deliberative process for the final rule was ongoing),” a former EPA official told the Washington Examiner.

King, the former NHTSA official, said she never read or saw Mulligan’s analysis, but she remembers commenting to a group of people at the time, which Mulligan may have been a part of, that the agencies were still weighing options for the final rule.

“We were still very much absorbing the comments and updating the analysis and had not made a decision,” she said. “It would have been premature to put out anything that suggested the administration was going to be deregulatory or pro-regulatory on this very important regulation.”

“Especially because the autos with their long planning cycles, they were reading tea leaves and making business decisions,” King added.

The Trump administration is facing multiple legal challenges to its fuel economy rule. Most of those lawsuits will argue the rule is much too weak, and many opponents note the Trump administration’s own analysis shows greater costs than benefits from relaxing the standards.

Environmentalists and former Obama administration officials have argued a fuel economy rollback will hurt the economy, as consumers benefit from significant fuel savings under tighter standards. Those fuel savings outweigh any increase in the cost of a new vehicle due to compliance, they have said.

The Union of Concerned Scientists calculates the Obama-era standards have saved consumers more than $108 billion in fuel costs to date.

Nonetheless, at least one lawsuit, from the Competitive Enterprise Institute, will argue the Trump administration’s rule is still too strict.

The auto industry’s major trade group, the Alliance for Automobile Innovation, is intervening in that lawsuit on behalf of many of its members, to defend the Trump rule against claims it should be weakened.

Mulligan told the Washington Examiner the Council of Economic Advisers is now slated to release a report on the fuel economy standards with the $86 per ton figure. A spokesperson for the council didn’t respond to a request for comment.

Mulligan said the car companies would never have been satisfied with a full gutting of the regulations.

“This was just too big a part of the car companies’ wallets,” Mulligan said.