NHTSA is just the latest regulatory agency under scrutiny for its failure to regulate.

As a result of the fatalities and law breaking at Toyota, as well as lapses in enforcement at the National Highway Traffic Safety Administration during unintended acceleration deaths, automotive regulations are about to be stiffened.

It’s not necessarily a good thing.

In a way this is a sequel: Ten years ago the fatalities and safety violations surrounding failing Firestone tires and Ford Explorer rollovers produced legislation that changed auto safety regulations and the practices of all auto and tire makers.

As the past is prologue to the future, it is not surprising that the new regulations will affect all automakers, and increase the expense of new vehicles by requiring them to pay fees to NHTSA to regulate them.

At stake are some key election year issues: How big and powerful should the government be? How are your tax dollars spent? What are they are spent on? And ultimately whether our safety agency is doing its job, as specified by the laws your representatives wrote, instead of being subverted by automakers or the former employees of automakers turned regulators.

Two aspects of new law are troublesome

The first is the incorporation of new fees or taxes instead of working within DOT’s generous budget. NHTSA, apparently, cannot be properly funded with the $79 billion taxpayers already provide. So big government gets bigger, instead of more efficient. Why is the working assumption by politicians always that more (borrowed) money has to be spent? (See Is NHTSA Underfunded in DOT’s $79 Billion Budget?) DOT has a huge budget, but little of the money is allocated to auto safety. Motor vehicles are responsible for 95% of the nation’s transportation deaths but only 1% of the Transportation budget.

The second problem is as worrying. NHTSA would also get the authority to impose unlimited fines on automakers. I’m not against fines, but no matter how egregious the behavior of auto companies – or in the current headlines, say, Wall Street firms or oil companies – the U.S. government was set up to provide limits to power with checks and balances – not un-limits to power.

This “divine right of kings’ proposal” in my view demands moderation. Moreover, given the amounts of money involved, it is likely to be the cause of much lobbying in “pay to play” Washington as corporations work behind the scenes to kill it, so it contributes to the ongoing problem of money in politics.

The first House hearing on what will be a complex bill occurs tomorrow in front of the Energy and Commerce Subcommittee. There will also be hearings later in the Senate on a similar, but slightly differing bill. Ultimately, unelected staff members of the politicians holding forth at the hearings will reconcile the two bills.

Some of the upcoming testimony no doubt will be a rehash of the obvious problems widely discussed during multiple Toyota hearings in both the House and Senate. (See Horror of Saylor Fatal Lexus Accident Reviewed at Opening of Congressional Hearing) However, this will be the first public discussion of the proposed changes, including the unlimited fines, additional user fees, new compliance reports and strict timelessness requirements.

Invited witnesses include:

• David Strickland, Administrator, NHTSA
• Dave McCurdy, President and Chief Executive Officer, Alliance of Automobile Manufacturers
• Michael J. Stanton, President and Chief Executive Officer, Association of International Automobile Manufacturers
• Joan Claybrook, Former Administrator, National Highway Traffic Safety Administration
• Clarence Ditlow, Executive Director, Center for Auto Safety
• Jim Harper, Director of Information Policy Studies, Cato Institute

This is a mixed group from an auto industry perspective. Both Claybrook, a former NHTSA administrator, and Ditlow, a Nader acolyte, have already suggested drastic changes in safety regulations and increases in fines during previous Toyota hearings.

Moreover, much of what they have said makes sense. The real governance issue is how to reform auto safety regulations, instead of allowing populist rhetoric and industry bashing to become law.

NHTSA, of course, already has extensive power to regulate motor vehicles — and is about to get more. The new legislation seeks to improve auto safety and strengthen NHTSA by increasing the agency’s almost non-existent expertise in vehicle electronics (See NHTSA Has Five Electrical, One Software Engineer!), and requiring new safety standards for vehicles run largely by electronic systems.

The law also seeks to beef up the agency’s enforcement authorities, while increasing transparency and accountability in auto safety. Moreover, as always in Washington, there is the “who pays” for the additional expense argument. Short fiscal answer: no matter who pays, they only pay about one-third of the real cost, we are borrowing and printing money to cover the rest.

Most of the new bill appears consistent with Congressional intent as stated in previous legislation. NHTSA was established in 1970 to save lives, prevent injuries, and reduce the economic cost of crashes. The Federal agency conducts crash data analysis, research, and rule making for vehicle safety. It is also responsible for overseeing issues related to fuel economy, child car seat performance, and – especially after deadly Firestone tread separations – tire safety.

NHTSA is also responsible for collecting consumer complaint data, investigating potential vehicle defects, and overseeing recalls of vehicles with safety defects.

Here is a closer look at what is in the draft of what will eventually become the Motor Vehicle Safety Act of 2010. As always, the devil will be in the details of the final bill.

Vehicle Electronics and Safety Standards

The legislation would strengthen NHTSA’s sadly lacking expertise in electronics by creating a new Center for Vehicle Electronics and Emerging Technologies within NHTSA. The objective is “to build, integrate, and aggregate the agency’s expertise in new technologies across all vehicle safety components, including research and development, defects investigation, and rulemaking.” It would also encourage engineering students interested in vehicle safety to work in government by establishing a fellowship program.

The legislation would mandate new safety standards related to electronics and unintended acceleration. This includes a standard that vehicles be able to stop using normal braking pressure, even when the throttle is open. There is also a standard that prevents pedals from being trapped in floor mats or other obstructions – the Toyota clause – and a standard for electronic systems performance.

The legislation mandates that all vehicles be equipped with event data recorders that record crash information. The legislation would also require that NHTSA issue a rule requiring such recorders be more stronger, store data from a longer time period before and after a crash, store more data elements as appropriate, and make the information easily accessible to investigators than is required under a current voluntary program.

Enhanced Safety Authorities for NHTSA

Under current law, NHTSA can seek limited civil penalties against companies that violate federal motor vehicle safety laws, including laws that require vehicles to meet safety standards and that mandate that companies share information about possible defects with NHTSA in a timely manner. The limit on civil penalties is $5,000 per violation with a maximum of $16.4 million. This bill would increase the fine to $25,000 per violation and would include no maximum.  (See Toyota to Pay $16 Million NHTSA Fine )

The legislation would also provide NHTSA with the authority to order an immediate recall if it finds a defect or lack of compliance with federal safety standards that creates an “imminent hazard of death or serious injury.” The affected company would receive expedited review of the recall order in the Court of Appeals.

Transparency and Accountability

The legislation would increase transparency by requiring that more “Early Warning Reporting” data be made available to the public. This data is submitted by the vehicle manufacturer to NHTSA every quarter. The legislation would further improve public accessibility to information on the NHTSA website, and would encourage consumers as well as manufacturer, dealer, and auto repair and mechanic personnel to report potential defects to the agency.

The legislation would add oversight to NHTSA’s investigations by enabling a citizen who files a petition to NHTSA requesting a defect investigation to seek judicial review if the petition is rejected.

The legislation would also increase manufacturers’ responsibility for information supplied to NHTSA by requiring a senior executive within the United States to certify the accuracy of information submitted to NHTSA in response to investigations.

Who Pays?

The legislation would establish a “vehicle safety user fee,” paid by the vehicle manufacturer for each vehicle certified to meet the federal motor vehicle safety standards for sale in the United States. This fee, which would supplement appropriations, would support the agency’s vehicle safety programs. In addition, the legislation would double the current authorization level for NHTSA’s vehicle safety programs over three years.