consumer choice

Washington State Ballot: Cracking Open the Wine and Spirits Market

by Angela Logomasini on October 29, 2010 · 2 comments

in Nanny State, Personal Liberty

This election day, Washington State voters will have to decide on two different ballot initiatives dealing with alcohol regulation (#1100 and #1105). The first will open the market to competition at all levels — allowing competition necessary to reduce prices, make shopping more convenient, and increase consumer choice. The second goes halfway, forgoing many benefits offered by the first. (A helpful chart comparing the two initiatives can be found in this Washington Policy Center study.)

Both initiatives would essentially privatize spirit sales, but 1100 would also eliminate government pricing schemes for all alcohol that currently bar retailers from offering discounts. In addition, it breaks the state-imposed three-tier system by eliminating regulations that keep retailers from buying wine directly from wineries around the world rather than buying it all through wholesalers. Initiative #1105 would privatize spirits (which is good!) but  keeps three-tier mandates intact and also includes harsh taxes and regulations that will keep prices high.

Tackling three-tier mandates–as 1100 would do — is critically important.  Three-tier mandates serve wholesalers and bureaucrats well — at the expense of everyone else. They ensure that retailers cannot simply buy direct from wineries and then pass savings onto consumers. It also means, if wholesalers don’t want to carry certain wines, retailers can’t offer them.

Initiative 1100 was originally developed and promoted by Costco, which wants to buy direct and offer steep discounts to consumers. Opponents suggest that means the initiative is designed to undermine small retailers and wineries to benefit “big box” stores. That’s ridiculous. Costco isn’t asking for special privileges. It’s asking for opportunity to compete.

Voluntary contracts and competition drives market players toward arrangements that ultimately benefit consumers, and that’s what 1100 is all about. This system gives everyone a fair-and-equal shot, whereas government regulations favor the politically organized. If Costco wins in an open market, it will win because it meets consumer demands.

Costco won’t be the only business that wins. A more open marketplace will raise the best businesses to the top. It will help wineries and retailers — large and small — explore new opportunities for marketing products.

And an open marketplace won’t destroy wholesalers or the three-tier system; it would simply base that system on voluntary contracts rather than mandates. Competition for contracts will reward those wholesalers that provide the best service and eliminate those dependent on governmental guarantees. California and D.C., for example, do not have three-tier mandates, yet wholesalers play a critical role based on voluntary market arrangements.

Still, opponents of both initiatives–a good portion of which includes wholesalers–have suggested that privatization and rational market arrangements will undermine public health and promote alcohol abuse. Concerns about alcohol misuse are certainly important they have no bearing on economic organization of the marketplace, nor could they ever justify government-created monopolies. Social problems should continue to be addressed by other means, such as checking identification and private social services to help abusers.

In fact, the data shows that states with more open economic arrangements do not suffer from more alcohol-related problems. For example, a study published by the Virginia Public Policy Institute compares data from 18 “control states” (where at least some kinds of alcohol is sold only in government stores) and 32 “license states” (states where all alcohol is sold in private shops). The researchers found no difference between the two approaches in terms of alcohol-related health and social problems.

Specifically, they found that between 2001-2005 the number of per-capital alcohol-related deaths, binge drinking incidents, and drunk-driving cases were roughly the same among the states, regardless of where the alcohol was sold. In other words, government ownership of any portion of the industry does not improve public health and safety. The Commonwealth Foundation drew similar conclusions in an analysis of the data that produced in 2009.

This Reason Foundation study underscores some of the other fallacies associated with “temperance”-based arguments favoring regulation. In addition, check out Tom Wark’s blog, Fermentation, for helpful information on the initiatives and problems associated with three-tier mandates.

Image: Wine at California Costco Store, by Willscrlt’s photostream on Flickr.

Populism, jobs and the economy — where do we go from here?

by Fran Smith on January 20, 2010

in Deregulate to Stimulate, Economy, Employment, Energy, Environment, Global Warming, Health and Illness, Stimulus to Nowhere

Scott Brown’s decisive victory in the Massachusetts Senate race has upturned the Democrats’ Progressive agenda.  Brown, “the people’s seat” senator, had a resonant message that tapped into the electorate’s disenchantment with ever-increasing government (with the health care proposals figuring strongly), huge deficit spending, and increased taxes to pay for the trillions of dollars in new government programs. Jobs and the economy were an overarching issue.

It was a populist victory that carried many of the themes of the “Tea Party” movement, which, so far, haven’t been promoted by either party.  If the Republicans don’t latch onto those themes with an agenda of their own, they really are the “dumb Party.”

What’s a cause for concern, however, is how the Democrats are likely to embrace people’s fear and anger by taking up their own populist cudgel to even more vigorously attack capitalism, consumer choice, and any and all Big Business entities.

There indeed is fierce popular anger at bank bailouts and big bonuses – Wall Street has become a synonym for greed and arrogance that caused the financial meltdown, with little recognition that government and quasi-government entities like the Federal Reserve and Fannie and Freddie contributed to the financial problems.

Though some banks deserve much of the public disapprobrium because of their mismanagement and sellout on TARP funds, even those banks that were healthy or fought their own way back to solvency are being asked to pick up the tab for their less-responsible brethren. Expect the Democrats to exact more such retribution from banks — in the name of the people.

In addressing the big issues of jobs and the economy, the Democrats will have a hard time spending more money on stimulus packages that seem to evaporate before any jobs are created. But there will probably be an even bigger push for “green jobs.” Democratic leadership may decide that a massive and economically destructive cap-and-trade bill isn’t feasible in this political climate.  They may look to more “green jobs” and “alternative fuels” boondoggles through taxes and fees on fossil fuel industries as a better way to sell the idea of restrictions on and higher costs for energy use. Yet those subsidized jobs themselves are costly, as the Wall Street Journal noted in mid-December 2009 about the 253,000 of direct jobs created:

The 253,000 direct jobs works out to a cost of about $90,000 a head-just for one year. Clean-energy manufacturing jobs are even more expensive to create, costing about $135,000 per job.

It will be difficult to relate the Democrats’ health care proposals to jobs and the economy when the costs are projected by the Congressional Budget Office at $1 trillion in additional federal spending over the next 10 years. But that figure – while astronomical — doesn’t include the states’ mandates, which will cost $25 billion more over 10 years or the unknown costs of the mandates for individuals and employers to buy insurance. Those costs will be paid for by increased yet hidden taxes – and not just on the so-called rich.

Plus, the closed-door negotiations on the bills have resulted in deals that most people consider unfair and outrageous, for instance, Nebraska is the only state that won’t have to pay future unfunded Medicare and Medicaid mandates; Louisiana gets $300 million for agreeing to support the Senate bill; and union members don’t have to pay “Cadillac-plan” taxes on their generous health care plans. These proposals will actually hold back job creation by causing uncertainty among both small and large businesses and thus reluctance to expand jobs. And taxpayers rightly understand that they will bear the increased costs.

In the wake of Scott Brown’s election, whether the Democrats will continue their shenanigans on their health care proposals isn’t yet clear.  Right now, they’re damned if they do and damned if they don’t.

Recently, CEI’s president Fred Smith wrote an article titled “Change we can really believe in,” which sets out a blueprint to stimulate the economy by liberating it.  Fred must have been prescient when he wrote this on January 4 — before the surge for Scott Brown:

This year holds promise for a new start for America. As 2010 begins, we may be teetering on a cliff, but Americans aren’t lemmings. Support for statist policies is dropping, and taxpayer anger is growing. There is a renewed understanding that the limitations on government of the Constitution are the best protections of our liberties. Their restoration should be the primary hopeful change advanced by all friends of liberty.

If you like FEMA, you’ll love federal health care, says Jindal

by Fran Smith on July 22, 2009 · 1 comment

in Healthcare, Nanny State, Personal Liberty, Regulation

Louisiana Governor Bobby Jindal has an op-ed in today’s Wall Street Journal providing a succinct critique of the Democrats’ health care plan and offering recommendations for a more market-oriented approach. Here are the concepts for reform he endorses:

  • Consumer choice guided by transparency – an integrated disease-management system.
  • Consumers’ financially invested in better health decisions.
  • Medical lawsuit reform to reduce need for costly defensive medicine.
  • Insurance reform – for portability, with reinsurance, high-risk pools, and other mechanisms.
  • Pooling for small businesses, the self-employed, churches and others.
  • Payment for performance, not activity – with integrated networks of care.
  • Refundable tax credits for low-income working Americans without health insurance.

While those recommendations are fine, they could go deeper and incorporate more free market suggestions, as outlined by Susanne Lomatch.  Here is a synopsis – heavily truncated – of those:

– Reform or repeal state health insurance mandates.

– Revise or repeal state health compliance and occupational requirements to allow nurse practitioners to perform greater number of physician tasks.

– Comprehensively revise Medicare/Medicaid and private insurance reimbursement policy to focus on catastrophic payouts.

– Review laws that prevent employers or insurance companies from offering low-risk pools.

– Encourage companies through revisions of state laws to consider ‘self-insurance’ for their employee groups.

Jindal has strong credentials in health care and its reform, starting with his thesis as a Rhodes scholar at Oxford, continuing with his early job in taking charge of Louisiana’s health care system, then serving as a top official at the Department of Health and Human Services and on commissions to look at Medicare financing, before getting elected to the U.S. Congress and serving as governor. One would hope he would have some clout on this issue where he has demonstrable expertise and would overcome the effects of his feeble performance for the Republicans in countering Barack Obama’s first address to Congress.

The Auto Bailout We Need

by Iain Murray on February 19, 2009 · 1 comment

in Deregulate to Stimulate, Economy, Energy, Politics as Usual, Precaution & Risk

The automakers have come back for more taxpayer money, which is exactly what we warned would happen when the first bailout was granted last year. The restructuring plans merely represent an attempt to acheive the results of bankruptcy, with the taxpayer picking up the costs. What is needed is not more taxpayer money, but a way to make US automakers competitive again. As I said in my recent Detroit News piece, we can do that through a simple, cost-free, program that will remove burdens Congress has unfairly placed on the US auto industry. These include:

• Repeal federal fuel economy requirements. They restrict consumer choice by insisting that fuel economy take precedence over safety and impose restrictions on design that reduce the competitive advantage of Detroit automakers. If a reduction in fuel use is a necessary policy goal (I would contend it is not, but that’s an argument for another time), there are other policy options that would not impose direct costs on the automakers or restrict consumer choice. One is to remove the absurd “two fleet” rule that uniquely hampers U.S. automakers by prohibiting them from counting their foreign-made vehicles toward their fleet fuel economy average. Moreover, by reducing the weight of vehicles, high fuel economy mandates remove the single most cost-effective safety design feature of all, so this bailout measure would also save thousands of lives each year.

• Reduce the burden of safety legislation. There are too many safety rules that are counter-productive, such as mandated air bags, which have proved dangerous to children and people of less-than-average height. Consumers should be free to pick from a menu of safety options that allows them to take their own circumstances and preferences into account. This does not mean that automakers should be free to build cars that explode on ignition. There is a range of safety considerations, from safe to extremely safe. The United States is requiring too many “extremely safe” features while perversely reducing safety though fuel economy requirements. Again, the Detroit manufacturers feel these more intensely than other manufacturers because of the sort of vehicles they have specialized in.

• Halt the march of further design regulations. My colleague Wayne Crews has identified 22 new regulations that were being pursued last year that would increase the costs of designing and manufacturing new cars.

• Remove artificial barriers to merger through too strict interpretations of antitrust law. Federal antitrust authorities have stopped attempts at a merger of General Motors and Chrysler because the two firms together would have a dominant position in the “light truck market.” Yet the recent oil price spike proved that customers easily substitute passenger cars for light trucks, showing that there is no such distinct market. If GM and Chrysler could merge, there would be plenty of scope for eliminating inefficiencies, which would allow the merged company to compete more effectively.

• Allow automakers–and, indeed, all firms–to repatriate foreign profits without double taxation. This will provide a much needed injection of funds. No other country handicaps its own companies in this way.

• Suspend particulate matter regulations emanating from California — but imposed on the United States. These regulations prevent automakers from selling in America the kind of high-mileage diesel-powered cars that sell well in Europe and meet all European emissions requirements. This will immediately reduce fuel usage and reduce the Detroit companies’ research and design costs, which must now go toward meeting California standards. Moreover, because the cars already meet European Union environmental and safety standards, there would be no significant reduction in those protections.

With such a “liberate to stimulate” program in place, US automakers will be able to regain their place as world leaders. Instead, we see GM begging Congress for $8 billion to design cars as fuel-efficient as ones they already sell in Europe. This is absurd and must end.

The Real Auto Bailout: A Six Point Plan for Regulatory Relief

by Iain Murray on December 19, 2008 · 5 comments

in Bailout Watch, Energy, Mobility

Here’s what the auto companies really need – a reduction in the regulatory burden placed on them by Congress. These burdens have placed Detroit at a competitive disadvantage because a lot of them are aimed at eliminating the sort of vehicles that Detroit has proved adept at designing and marketing.

1. Repeal the CAFE requirements. They restrict consumer choice by insisting that fuel economy take precedence over safety, and impose restrictions on design that reduce the competitive advantage of Detroit automakers. If reduction in fuel use is a necessary policy goal – and CEI would contend that it is not – there are other policy vehicles to use that would not impose direct costs on the automakers or restrict consumer choice. Moreover, by reducing the weight of vehicles, CAFE removes the single most cost-effective safety design feature there is. It would also remove the ludicrous “two fleet” rule that uniquely hampers US automakers.

2. Reduce the burden of safety legislation. There are too many safety rules on the books that are actually counter-productive, like mandated air bags. Consumers should be free to pick from a “menu of safety options,” taking their own individual circumstances and preferences into account. This should not be taken as a suggestion that automakers should be free to build cars that explode on ignition, but that there is a range of safety considerations that range from safe to extremely safe, and at present we are mandating too many “extremely safe” features while at the same time perversely reducing safety though CAFE (see point 1 above). Again, the Detroit manufacturers feel these more intensely than other manufacturers because of the sort of vehicles they have specialized in.

3. Halt the march of further design regulations. There are plenty of examples here.

4. Remove the artificial barriers to merger represented by too strict interpretations of antitrust law. This will enable GM and Chrysler to merge.

5. Allow automakers and, indeed, all firms to repatriate foreign profits without having to pay a double tax. This will provide a much needed injection of funds. No other country handicaps its manufacturers in this way.

6. Suspend particulate matter regulations emanating from California that prevent the automakers selling high-mileage diesel-powered cars that sell well in Europe and meet all European emissions requirements. This will immediately reduce fuel usage and reduce unnecessary research and design costs.

Taken together, this deregulatory bailout package would restore Detroit’s competitive advantage and obviate the need for taxpayer money. Congress has hurt Detroit with these rules. It should recognize that and remove them, rather than hurting taxpayers as well.