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The government does not have to force the motor vehicle manufactures to produce more fuel efficient cars. If the government would raise the price of gas (most of the cost is taxes) to European levels, people would demand more fuel efficient cars. When gas costs less per gallon than bottled water, milk, soft drinks, etc., the cost of gas is not very important in people buying a car. If the cost of gas was $4 a gallon or higher, the motor vehicle manufacuters could not build enough fuel efficient cars to keep up with the demand.
One arguement against higher gas prices is that it would hurt the poor since it is a greater percent of their income. This could be handled by some form of tax credit or negative income tax. The money raised through additional gas taxes could be used to fund the tax credits or negative income tax.
Of course, no one like higher taxes and it is more politically popular to blame the auto manufactures for the problem. Government would rather hide behind regulations and not use the market to get the desired social behavior.
We have lots of people saying that we need more mass transportation. The mass transit system of the US is the car. Those promoting "mass transit" tend to have an elitist, political agenda wanting to mold others into their vision of utopia.
The auto manufactures are in a bind. We try and build cars that people want and will buy while meeting many government regulations. Our vehicles must be sellable and as policically correct as possible. If the government would do its job in creating the market instead of trying to regulate it into shape, we would get the best of many worlds. We could have both fuel efficiency and performance based upon a person's desire to pay.
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