From the Archives: Delegate Steve Landes is 'keeping an open mind' on Governor McDonnell's ABC privatization plan

Delegate Steve Landes is 'keeping an open mind' on Governor McDonnell's ABC privatization plan
August 29, 2010 12:08 PM MST

Governor Bob McDonnell’s proposal to privatize Virginia’s state-owned liquor stores “has some possibilities,” said Delegate Steve Landes (R-25) after a town-hall meeting on government reform in Harrisonburg on August 26.

Landes, whose district includes parts of Albemarle, Augusta, and Rockingham counties, as well as the city of Waynesboro, added that “at this point” he is “keeping an open mind.” He wants to talk to his constituents to find out what they like and don’t like about the plan.

Delegate Landes spoke to the Charlottesville Libertarian Examiner on the campus of James Madison University as the crowd dispersed from the governor's town hall. State Senator Mark Obenshain and Delegate Dickie Bell were also interviewed that night.

‘Public safety concerns’
The governor, he said, had “addressed a lot of the public safety concerns” but as a member of the House Appropriations Committee, one of his main concerns is “how is the revenue going to work, where would that go, how are we going to offset what could be a reduction” in the money the state takes in from liquor sales. Landes also expressed concern about what would happen to the portion of ABC profits that goes to local governments.

Asked if he has a sense of what his colleagues in the legislature are thinking about ABC privatization, Landes replied:

“Most of the people I’ve talked to are just like I am, trying to get information, trying to find out what the proposals are, [and] what the governor may be proposing.”

Once the government releases “his formal proposal,” Landes said, “we’ll all be looking at that.”

‘Devil’s in the details’
As a member of the General Assembly for the last 16 years, Landes explained, he has “found that the devil’s always in the details, so you need to see the bill, you need to see what it says, and where the dollars are going to go, how the franchise sales would be, who would be eligible, whether you’re talking about small business people or just larger corporations, chain stores, and the like. All those details would have to be looked at before I could say whether I’m in favor or against it.”

Regarding the question of whether privatization of the ABC system is a “matter of principle,” Landes pointed to his support of the private sector and free enterprise over the years, adding that “there is a good argument from the standpoint of, ‘we don’t control beer and wine [so] why is the state in the business of’” selling distilled spirits?

Noting the current economic climate, Landes went on, “If the economy was really good, it would be an easier decision for me, because we’re not looking at what the revenue picture is, where the dollars are coming from, where they’re going to go.”

The issue would be easier for him to decide, he said, because as a member of the Appropriations Committee, “I think you have to look at making sure that the dollars are going to match up and that projections would be there to offset what the state might lose from the standpoint of sales and what we might obtain from the standpoint of tax revenue.”

Publisher's note: This article was originally published on Examiner.com on August 29, 2010. The Examiner.com publishing platform was discontinued July 1, 2016, and its web site went dark on or about July 10, 2016.  I am republishing this piece in an effort to preserve it and all my other contributions to Examiner.com since April 6, 2010. It is reposted here without most of the internal links that were in the original.

From the Archives: Economist Antony Davies debunks arguments against liquor sale privatization

Economist Antony Davies debunks arguments against liquor sale privatization
August 5, 2010 5:12 PM MST

Based on studies he has done regarding the privatization of alcoholic beverage sales in other states, Duquesne University economist Antony Davies concludes that “the major opposition surrounds the social impact of privatizing alcohol. The conventional wisdom would say if you privatize alcohol, the state loses control, and you will see more social problems associated with drinking.”

Empirically, however, this is not true, Davies told the Charlottesville Libertarian Examiner in a telephone interview on August 5. He distinguished between levels of “control,” from the free-market systems that exist in most states, to moderate control (such as in Virginia, where beer and wine are sold by private businesses) to full control (such as Pennsylvania, where even beer and wine are sold by a state-owned monopoly).

No Substantial Difference
A 2009 study he wrote for the Commonwealth Foundation for Public Policy Alternatives (a Pennsylvania think tank) with fellow Duquesne economist John Pulito, resulted in these findings, based on statistics from 1970 through 2006:

“….advocates claim that the social goals of reducing alcohol consumption, underage drinking, and alcohol-related traffic deaths justify controlling wholesale and retail alcohol markets.

“Evidence from 48 states over time shows no link between market controls and these social goals.”

Dr. Davies said in the interview that “we’re not seeing any evidence that greater control leads to better social outcomes.”

There is an exception, however, that Davies pointed out over the telephone: “DUI fatalities are significantly higher in states with more control than states with less control.”

Other factors, however, are different, he said. “If you look at per capita alcohol consumption, there’s no difference as you move from full to moderate to light control.”

Underage Drinking
As to claims that state-owned liquor stores are a better protection against selling alcohol to minors and underage drinking, Davies explained that people think “at a gut level” that private businesses “have an incentive to sell to minors. We see that’s not the case.”

Why not? “If alcohol is sold in the private market, the owner of the store has a profit incentive not to sell to minors, because if he gets caught, he loses his license. He wants to protect his business.”

Davies, who is also a visiting scholar at the Mercatus Center at George Mason University in Northern Virginia, concludes: “If you look at the data, there’s no clear pattern [that emerges showing] that imposing more control reduces underage drinking.”

Financial Arguments
In addition to the “social outcome” arguments against privatization, Davies said that “there are some financial arguments but they tend not to hold too much water.”

Those arguments, he said, “are pretty easily knocked down when you realize the state can continue to tax alcohol regardless of whether it’s sold publicly or privately.”

Davies pointed to legislation currently under consideration by Pennsylvania, which proposes to sell that state’s alcoholic beverage stores. “What’s pushing this [proposal] is the budget crunch. Selling the state store system would immediately raise the $2 billion necessary to close the budget gap.”

From the state’s perspective, Davies continued, “this is a win-win situation financially. The state can sell off its ABC system for a lump sum of cash and then continue to collect alcohol taxes and fees.”

As for Virginia, Professor Davies said he did a “back of the envelope calculation” after “looking at latest ABC statement of revenues.” Superficially, he said, “Virginia would lose about 30 percent of what it’s taking in” in operating profits.

What that doesn’t take into account, however, is lost revenue from Virginia customers who do their shopping in the District of Columbia, Maryland, West Virginia, and North Carolina. Nor does it account for the revenue increases that will result from private operation of liquor stores.

“Here’s why it may be revenue-positive,” he explained. “You achieve all these things – more convenient locations, more convenient hours, better customer service, so sales will increase. Plus auctioning off licenses” will result in previously unavailable revenue for the state.

Rent Seekers
Davies also addressed why one of the primary opponents of ABC privatization would be groups like the beer wholesalers, whose products are already sold in privately owned stores.

“Beer wholesalers,” he said, “are most against privatization of wine and spirits because it increases their competition.” By making comparable products more easily available to the same customers, “that’s going to eat into the profits of the beer distributors.”

In that regard, Davies offered some advice for voters and taxpayers who are paying attention to the privatization debate in Virginia:

“Generally speaking, the economists’ mantra is ‘follow the money.’ If you find someone arguing for or against a regulation, ask where he gets his money from.”

That seems to be a simple explanation of the motivation of some opponents of ABC privatization.

Publisher's note: This article was originally published on Examiner.com on August 5, 2010. The Examiner.com publishing platform was discontinued July 1, 2016, and its web site went dark on or about July 10, 2016.  I am republishing this piece in an effort to preserve it and all my other contributions to Examiner.com since April 6, 2010. It is reposted here without most of the internal links that were in the original.

From the Archives: Aviation policy expert Robert Poole talks about transportation privatization

Publisher's note: This article was originally published on Examiner.com on April 10, 2010. The Examiner.com publishing platform was discontinued July 1, 2016, and its web site went dark on or about July 10, 2016. I am republishing this piece in an effort to preserve it and all my other contributions to Examiner.com since April 6, 2010. It is reposted here without most of the internal links that were in the original.

Aviation policy expert Robert Poole talks about transportation privatization

A Cato Institute briefing on Capitol Hill on Friday, April 9, asked the question, “When Does Rail Transit Make Sense?” and featured policy experts Randal O’Toole and Ronald Utt. The event attracted mostly young congressional staff members but also in the audience was Robert Poole, the Reason Foundation’s director of transportation studies.

As it happened, the lead article in the commentary section of the Washington Times that day was written by Poole, in which he argued that the federal government should get out of the business of screening airport passengers. He made two primary recommendations:

“First, TSA should be divested of its airport screening duties. TSA should regulate and oversee security, but each airport should be responsible for all aspects of its security (passenger and baggage screening, perimeter security, etc). Airports would be free to hire their own security forces or contract with TSA-certified firms.

“Second, the cost of airport security should be paid for by those who use airports: a combination of airlines and passengers. This change would cut billions from the federal budget, eliminating the large portion of airport security costs not covered by current airport or airline security taxes. It also would make the costs of airport security more visible to airlines and travelers.”

After the Cato briefing, Poole replied to a question from the Charlottesville Libertarian Examiner about the future of transportation privatization.

“It’s very up in the air right now,” Poole said. With regard to surface transportation, the chairman of the House Committee on Transportation and Infrastructure, Congressman James Oberstar (D-Minn.) “wants to basically create a federal czar to have the last word, to say yes or no at the eleventh hour on any proposal for privatizing highways. That’s got the whole industry really, really nervous because nobody wants to take the risk of proposing and researching a project, then having it vetoed at the last minute after they’ve spent millions on putting their numbers together.”

In terms of airports, Poole said, “we have a little boomlet going on right now of cities that want to lease their airport under the federal airport privatization pilot program. I’m guardedly optimistic about that. Midway Airport is the most visible one but there are four others, at least, that have filed applications with the FAA.”

While none of these airports are in Virginia, there is one close by, Poole explained:

“Baltimore has talked about it but they haven’t filed. The state runs the airports in Maryland, and the governor said he would be open to an offer for BWI, which I was astonished to hear, but glad to hear. New Orleans and San Juan are two of the other leading candidates; they have applications filed. It could happen this year.”

Poole recommended that Examiner.com readers interested in transportation privatization issues should check out the Reason Foundation’s annual privatization report and Reason’s Airport Policy and Aviation Security Newsletter.

Set Your Clock Radio Alarm

Last week's guest spot on Coy Barefoot's WINA-AM radio show was so successful that I have been invited back to do the show again tomorrow (Thursday), September 2, during the 4:30 to 5:00 p.m. segment.

One way to measure success on talk radio is by counting the number of listeners who call in with a question or comment.  A couple of months ago, I was on Coy's show and nobody called in, which was disappointing.  But last week's appearance attracted five callers on the air, with two others waiting to talk when the show segment had to break for the news at the top of the hour.

You can hear the whole conversation from August 24, including the call-ins, at Charlottesville Podcasting Network.

Last week we talked about Governor Bob McDonnell's proposals to privatize the state ABC monopoly and the Fifth District congressional race.  I expect this week's discussion will address those topics, with a different angle, or similar topics of interest to Charlottesville listeners.

So tune in tomorrow to "Charlottesville Right Now" on WINA (1070 AM) and feel free to call with questions, comments, or challenges.  Both land-line and cell-phone calls are welcome.

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Ahead of the Curve

Forgive the preening, but sometimes bloggers can be ahead of the curve in covering an important story.

In this particular case, my prescience was not displayed on my blog (what you're reading now) but on my Examiner.com page.

Sunday's Washington Post featured a long article by Rosalind S. Helderman headlined "Virginia ponders losing ABC stores; studies conflict on privatizing liquor sales," in which she cites a study conducted by Duquesne University economist Antony Davies:

A much broader study in Pennsylvania examined 36 years of data from 48 states with varying degrees of alcohol control. It found that private states have lower per-capita alcohol consumption and lower drunken-driving fatalities than states where government controls segments of the industry. It found no significant difference in underage drinking between the two models.

Like the recent Virginia report, it was funded by a foundation that advocates smaller government. But its author has submitted the findings to an academic journal for review, and he defended the results as unbiased.

"The fact is, we can play that game, who gets funded by whom," said Antony Davies, the Duquesne University economist who wrote the report.

"What happens is, we all have to go home, and nobody asks any questions at all. Everybody gets funded by someone," he said. "The better thing to do is to give researchers the benefit of the doubt that they're trying to find truth, and then look at the data and the studies."

Please note that, before the Post ever wrote about Antony Davies, I interviewed him for Examiner.com, and actually quoted him on the substance of his research, rather than about the game critics play about "who gets funded by whom."

Here's an excerpt from that August 5 interview, which I titled "Economist Antony Davies debunks arguments against liquor sale privatization":

A 2009 study he wrote for the Commonwealth Foundation for Public Policy Alternatives (a Pennsylvania think tank) with fellow Duquesne economist John Pulito, resulted in these findings, based on statistics from 1970 through 2006:

“….advocates claim that the social goals of reducing alcohol consumption, underage drinking, and alcohol-related traffic deaths justify controlling wholesale and retail alcohol markets.

“Evidence from 48 states over time shows no link between market controls and these social goals.”

Dr. Davies said in the interview that “we’re not seeing any evidence that greater control leads to better social outcomes.”

There is an exception, however, that Davies pointed out over the telephone: “DUI fatalities are significantly higher in states with more control than states with less control.”

Other factors, however, are different, he said. “If you look at per capita alcohol consumption, there’s no difference as you move from full to moderate to light control.”

Underage Drinking
As to claims that state-owned liquor stores are a better protection against selling alcohol to minors and underage drinking, Davies explained that people think “at a gut level” that private businesses “have an incentive to sell to minors. We see that’s not the case.”

Why not? “If alcohol is sold in the private market, the owner of the store has a profit incentive not to sell to minors, because if he gets caught, he loses his license. He wants to protect his business.”

Davies, who is also a visiting scholar at the Mercatus Center at George Mason University in Northern Virginia, concludes: “If you look at the data, there’s no clear pattern [that emerges showing] that imposing more control reduces underage drinking.”

Note, too, that I specifically name the Commonwealth Foundation while the Post refers to it vaguely as "a foundation that advocates smaller government" (as if that's a bad thing).

Helderman deserves credit for seeking out a free-market economist like Dr. Davies for her story.  But you heard about him from me first -- just like Governor Bob McDonnell telling me that the Post got it wrong in reporting that he was leaning toward selling the ABC system to a single high bidder.

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Scoop: Private Liquor Monopoly Is 'Not Going to Happen'

Disturbed by reports in the Washington Post and repeated by Josh Eboch on the Tertium Quids blog that Governor Bob McDonnell's plan to privatize the state-owned liquor monopoly could include selling the whole system to a single high bidder, I decided to find out for myself if this was true.

First, here is what Anita Kumar said in the Post:

McDonnell is leaning toward auctioning off an undetermined number of licenses to the highest bidder.

Governor McDonnell held the sixth of his eight planned town-hall meetings on government reform last night in Harrisonburg, on the campus of James Madison University. Afterwards, he took questions from reporters and I fired off the first one.

This is a complete transcript of our exchange:

Q: I’ll ask you a question. The Washington Post reported yesterday or the day before that the ABC privatization could include selling the whole kit and caboodle to one high bidder. Is that off the table?

A: Absolutely. We’re not going create a private monopoly to replace a government monopoly. That’s not going to happen.

Q: So the Washington Post was wrong?

A: I didn’t read that, and so I’ve never heard that.

You can see that Q&A, plus Governor McDonnell's answers to questions posed about job creation and immigration, in this video on YouTube:

By the way, my latest piece on ABC privatization, an interview with John Taylor of the Virginia Institute for Public Policy, is available for reading on Examiner.com.

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My Interview with Virginia Governor Bob McDonnell

Nearly 15 years ago, syndicated columnist Deroy Murdock wrote an article that appeared in the Washington Times (February 26, 1996; not available on the Web) with the headline, "Prohibition, alive in Virginia."

Murdock focused particularly on a then-pending lawsuit concerning the Commonwealth of Virginia that had been brought by a wine distributor, in a case known as Brown-Forman Corporation vs. Sims Wholesale Company.  He also took broader aim, however, at Virginia's post-Prohibition system of controls over the sale and distribution of beer, wine, and spirits, including a government-owned and -operated monopoly on the wholesale and retail sales of distilled spirits (that is, liquor).

Murdock quoted a libertarian political activist who at the time lived in Arlington County, across the Potomac River from Washington, D.C.:

Stiff limits on the importation of alcohol lift this 80-proof trade wall even higher. It is against state law to bring more than one gallon of wine, beer or spirits into Virginia. Despite the fact that "you could reasonably say that the prices in Washington, D.C. are lower than in Virginia," as Mr. [Curtis] Coleburn states, anyone who bought a case of beer in Georgetown and drove it to a barbeque in Fairfax would be a lawbreaker.

All of this limits consumer choice. "In Arlington County, with a population of 200,000, there are only four ABC stores I am aware of," says writer and policy analyst Richard Sincere. "In a four-block radius of my office in downtown Washington, D.C., there are six or eight liquor stores." Mr. Sincere also sees far more variety in District stores than in Virginia's. Washington retailers "sell more than liquor." "They have cheese, wine glasses, potato chips and newspapers. The Virginia ABC stores have all the personality of a DMV office. They're plain cinderblock structures with plain walls. There are no advertising posters, no color. They remind me of my trip to the Soviet Union in 1987. There were stores there that just were called `Milk' or `Bread.' In Virginia, they say `ABC Store' in big block letters. This is the last vestige of socialism in Virginia."

In a suggestion aimed at then-Governor George F. Allen and the still-Democratic-majority General Assembly, Murdock said that privatization was overdue:

The Elliott Ness-era moonshine still that is Virginia's alcohol policy should be streamlined for the 21st Century. Wine and spirits manufacturers should be free to hire and fire distributors as swiftly as law firms can pick and choose among FedEx, UPS and Airborne. State liquor stores should be privatized, perhaps with their public-sector employees given the first crack at buying the means of alcohol distribution at a fair market price. Virginia's alcohol consumers should be free to shop in Washington. and surrounding states to satisfy their wallets and taste buds. And if they drink what they buy on the drive home, they should be arrested and stripped of their drivers' licenses.

Fast forward a decade and a half, and we can see that this issue is still on Virginia's agenda.  Governors since George Allen have urged consideration of privatization proposals, but there has been no movement.  Now, however, a window of opportunity may exist for Virginia's political leaders to make a decision that modernizes and liberalizes the ABC system, acknowledging that the free market is better than socialism.  This time, ABC privatization is a top priority for Virginia's governor.

On Wednesday evening in Roanoke, Governor Bob McDonnell hosted a town hall meeting to discuss his government reform proposals with constituents, some of whom came from as far away as Craig County.

While McDonnell insists (see video below) that there are "hundreds" of suggestions for government reform -- making government more effective, more efficient, and less costly -- the centerpiece and most popular (and most controversial) of those suggestions is the one he made during last year's gubernatorial campaign.  That is, to privatize the state's monopoly on liquor sales, turn it over to the private sector, and use the hundreds of millions of dollars in proceeds to pay for improving Virginia's transportation network.

About an hour before the town hall meeting began in the chamber of the Roanoke County Board of Supervisors in front of a standing-room-only audience, Governor McDonnell sat down with me for a one-on-one interview on the specific issue of ABC privatization.

An edited transcript of our conversation can now be seen in two parts on Examiner.com.  You can read Part 1 here, and Part 2 here.

The complete conversation can be seen on this video, taken by Steven C. Latimer.

Other articles I have written on the topic of ABC privatization include an interview with Garrett Peck, author of The Prohibition Hangover: Alcohol in America from Demon Rum to Cult Cabernet; another with Reason.tv's Nick Gillespie, who calls Virginia's monopoly control of distilled spirits "mind numbing"; and a third with Antony Davies, an economist affiliated with the Mercatus Center at GMU who teaches at Duquesne University, who has studied the differences between control- and free-market states over a 36-year period.

I have some other interviews on this topic "in the can," so look for them on Examiner.com soon.

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