"One way to do that would be to establish a price floor of $3.50 per gallon on gasoline. If the price drops below that, as it recently has, the federal government would impose a variable tax to bring the price up to $3.50. If the price goes above $3.50, then the tax disappears. The money raised by the variable tax would be used, at least in the short term, to provide loan guarantees to the auto companies. (To ease the burden of higher gasoline prices on low-income taxpayers, some of the revenue would be provided to them as tax credits or vouchers.)"
I don't need a degree in business or economics to know that this will never work. Gas stations compete on price. If you artificially prevent them from doing that, then why should they make any attempt to keep their prices down? If there's no competition from the gas stations across the street, then of course they're all going to set their prices at $3.50 a gallon, and the government will get nothing.
Let's assume for just a minute that the government has the authority to determine exactly how much profit that each company is permitted to take, as a percentage of their revenue. (We'll ignore for now all the reasons why this is a colossally bad idea.) Here's the problem: The government can't force a company to keep their overhead costs down. Only competition can do that.
And that's exactly what's happening to the automotive industry right now.
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