Nearly two years ago I wrote a column which caused an instant e-mail overload. Yes, I said, with oil then nearing $50 a barrel many in the U.S. would soon want the tiny cars found throughout Europe and Asia, cars not much bigger than a ski-mobile that get 50 miles per gallon and often better.

Various e-mails said such vehicles would never make it in the U.S. market; that they were too small in our SUV-ladened highways and that the mere thought of small cars on U.S. streets was essentially unpatriotic.

Oh well.

Last week DaimlerChrysler announced that its "smart" (with a small "s") cars would be entering the U.S. in 2008.

The smart is among a breed of European and Asian mini-cars and trucks that get incredible mileage, look great and are cheap to operate. Already available in Canada, smart cars are within the realm of affordability for virtually everyone.

The need for fuel-efficient cars is a by-product of common sense and our need for reduced oil usage. There's no question that oil and access to it are at the heart of a host of political and economic issues.

As Kevin Phillips explains in his new book, American Theocracy, "Since the early twentieth century the world's age of oil has been an era of American supremacy. Few doubt the interrelationship. Not merely a symbol of U.S. global power, petroleum has been the fuel for military might, twentieth century supremacy, and the latter-day SUV gas-hog culture. Oil abundance has always been part of what America fights for, as well as with."

We're now racking up international debt at better than $2 billion a day -- and much of our overall spending relates to oil at $70 a barrel and the higher costs it creates throughout the economy, costs which make us less competitive. The way things are going, we'll add more than $800 billion to our tab in 2006.

To see this in context, consider that our gross domestic product -- all that we produce -- is about $13 trillion a year. In essence, for every dollar we earn we're spending $1.06. Already there's an effort to price oil in a currency other than dollars, a change that would greatly increase our energy costs. Eventually the happy people who now lend us money will decide that our credit is not so good and either raise the interest rates they charge or they'll take their lending elsewhere to protect their currency from devaluation.

You can see this process in action with a business that's really good at spending but not so good at earning. To finance its operations and expansion, the company borrows in the marketplace.

At first, investors are happy to buy the company's bonds because they think company profits will repay the debt and interest over time. However, as negative results pile up year-after-year, investors increasingly see the company as more risky and thus require more interest before they will buy additional debt. In time the company is only able to issue high-cost "junk" bonds which means that its credit expenses will be far steeper than competitors, a cost which makes competition more difficult.

Eventually, if the company doesn't turn around, investors will no longer lend to it at any interest rate. Bonds will be re-sold at pennies for the dollar. The remaining bondholders will become the new owners, the old shareholders will get zip and the new owners will move immediately to downsize the company.

Our federal government has no effective, realistic oil-reduction program and thus it has no effective, realistic economic plan. As with the levees in New Orleans, we are told and re-told that everything looks great -- at least until it rains.

As well, without a believable oil-reduction program we cannot have a credible effort to curtail global warming. Global warning theories used to be belittled and derided, but now it's hard to ignore. In the past week the IRS headquarters building in Washington, DC was closed because of flooding -- evidence of either new weather patterns or divine retribution.

The betting here is that traditional U.S. car manufacturers will soon offer another round of "employee discounts" to get inefficient cars off dealer lots. Such discounts would not be necessary if U.S. manufacturers simply produced cars that were in demand, the cars that make energy sense in the first place.

It's worth noting that while Ford and GM are laying off huge numbers of employees, Toyota had a record year and is building a new plants in Texas and Ontario. Honda, not to be outdone, is spending $550 million to build a new plant in Ohio.

If our national economic course does not change, the impact will be profound. The Federal Reserve will raise interest rates to historic highs to attract foreign capital. Interest on the national debt will consume a far larger percentage of government revenues -- meaning there will be fewer dollars for other programs. If the government simply prints more money to pay creditors, inflation levels will soar. In such an environment there won't be 30-year, fixed-rate mortgages because inflation will be at levels normally associated with third-world countries.

We do have a choice. A slew of small, efficient vehicles; ethanol; coal conversion and oil from Canadian tar sands are some of the seeds which can lead to economic stability and political independence. We can insist on tougher fuel standards for cars and trucks -- not the fake standards riddled with exceptions that we now have.

We should have created such alternatives years ago; perhaps this time around we'll do the "smart" thing -- while we still can.

(Note: The photo above was taken in Rome, Italy in August, 2004. The "small" car shown is a four-door station wagon -- even smaller, two-door, two-seat cars are common.)

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