November 30, 2015 | Commentary on Regulation, Economic Analysis, Economic Freedom

Common-sense reforms can save consumers serious cash

The holiday season is fast upon us -- that time of year when Americans across the country gather 'round the warm glow of their computer screens and try to figure out how on earth they are going to balance their budgets.

Political debates can seem a long way away when you're in a room alone with your credit card bill, but commonsense policy reforms at every level of government could save Americans money.

I looked at dozens of studies, and did some math of my own, and found that just 12 important reforms could save the average American household $4,440 every year. Some of those savings would come from lower prices on everyday purchases, such as food and gas; some would come on big-ticket items, such as cars and houses.

Two federal reforms could lower the price of gas by 31 cents per gallon. Repealing the 1975 crude oil export ban would allow U.S. oil to be shipped to the refineries that are best equipped to turn it into gasoline for American travelers, thus lowering the price. Congress recently passed a bill that would lift the ban, but President Barack Obama has threatened to veto it.

The second reform that would save Americans money on gas is to end the failed experiment with corn-based ethanol. The ethanol mandate, officially known as the Renewable Fuel Standard, dilutes gasoline with ethanol, which is less efficient and costs more. Not only would repeal of the ethanol mandate lower the price of gas by 19 cents a gallon, it would also save the average household $1.65 a week on groceries by letting farms do what they do best: grow food.

Two other reforms would lower the cost of a new car by $5,750.

Economists and engineers who studied the complex, rigid fuel efficiency standards established by the Obama administration in 2009 predicted that the new regulations would seriously hurt consumers, especially low-income consumers. As predicted, the prices of new and used cars have risen thousands of dollars above their previous trend. Removing the corporate average fuel efficiency, or CAFE, standard would take, on average, $3,800 off the price of a new car.

Even if Washington will not act, individual states can lower the price of a new car $1,950 -- simply by allowing competition among auto dealers and manufacturers. Currently, American customers are forbidden from buying a car directly from a manufacturer. When General Motors introduced online manufacturer-to-customer sales for one of its popular models in Brazil, prices fell 6 percent. Studies suggest that U.S. prices would fall similarly if customers could buy directly online. That arrangement would also let consumers order exactly the options they want on a new car. Just think: a custom-made car with a lower price tag.

These are not the only areas where reforms would save American consumers money. Any regulation that requires workers or businesses to get permission (such as a license or a permit) from the government before they work -- rather than just requiring that they follow the rules while they work -- is most likely raising costs unnecessarily. Any law that was written with the interests of a specific industry in mind is a good candidate for consumer-friendly repeal.

If Congress joined with city councils, zoning boards, county executives, and state legislatures across the country to remove barriers to competition and time-wasting, cash-burning regulations, American families would be better off.

-Salim Furth is a research fellow in The Heritage Foundation's Center for Data Analysis

About the Author

Salim Furth, Ph.D. Research Fellow, Macroeconomics
Center for Data Analysis

This piece originally appeared in the Bradenton Herald