INSIGHTS: THE STATE OF THE NANNY STATE
By Guest Column Michelle Minton:
Fellow in Consumer Policy Studies, Competitive Enterprise Institute
From light-bulb to smoking, free market proponents around the nation watched with falling spirits as numerous nanny-state bills became nanny-state laws in 2011. The philosophy that government’s proper role and function is to protect adults from their own bad choices has become gospel truth for many Americans. However, for those wishing to reduce the size and scope of government and preserve individual freedom, there were a few strides made here and there.
The Good: Alcohol Privatization
For those of us who believe that the government has no business telling us where, when and what we consume, the news wasn’t all bad in 2011. After a multi-year campaign to get the State of Washington out of the business of selling liquor, privatization proponents succeeded in getting their measure on the November ballot and approved by a majority of voters. As a result of the success in Washington and the expected revenue boon, some of the remaining 17 states with government-controlled liquor sales are looking into privatization, such as Idaho, Michigan, Oregon, and Pennsylvania.
The Bad: California’s Year of the Nanny
While a few states pondered the boon they could garner through liberalizing markets, California was focused on ways to lock up business and tie the hands of consumers. San Francisco Weekly dubbed 2011 the “Year of the Nanny” in California, for the trio of home-worker laws passed in the year. However, the title is even more appropriate as a description for the sheer number of invasive and paternalistic policies enacted in the Golden State during the last year. Californians will have to abide by no less 760 new laws in 2012 including a prohibition on children under 18 using tanning beds, a mandate that parents with children under 8 buy and use booster seats while riding in cars, and a ban on buying alcohol at grocery stores using the automatic check-out lines.
The Ugly: Sin Taxes
The newest fad in nanny-state regulation is the attempt to tax away naughty behavior and shore up state budgets at the same time. Massachusetts, Governor Patrick has proposed a tax on candy and soda as well as a 50 cent tax hike on cigarettes. A large number of other states are considering proposals to tax soda and junk-food, while a recent article in the journal Nature proposes simply taxing sugar altogether. While an interagency panel suggested banning junk food marketing that could be seen by or appeal to children, numerous states are using federal Recovery Act dollars to fund anti-obesity advertising campaigns.
While the surge of paternalism seems unstoppable at times, the best counter-measure is an astute public willing to stand up to nanny state regulations that strip Americans of their right to make choices about their own lives. Keep track of the latest regulatory developments at www.Openmarket.org.
Editor’s Note: The Competitive Enterprise Institute is celebrating Human Achievement Hour 2012 on Saturday, March 12th at 8:30 p.m. to 9:30 p.m. Businesses that publicly pledge to leave their lights on will receive a Champion of Human Achievement poster and be named on CEI.org’s list of Champions
ON THE ECONOMY: Rocket 88
By John Dunham:
Managing Partner, John Dunham & Associates
In 1951 a guitarist named Ike Turner put together a band and recorded a song at Sun Studios. Rocket 88 quickly took off, and became what Sam Philips dubbed the first rock-and-roll song. Rocket 88 was about a car with a giant V-8 engine produced by Oldsmobile. The car was the hit of the NASCAR circuit in the early 1950s and was one of the most powerful production vehicles of the time. Honestly, I can’t even find an estimate for the car’s fuel economy, but who cared. Gasoline cost about 18-cents a gallon (that would be about $1.69 per gallon today).
With gasoline approaching $4.00 per gallon, and with some pundits estimating $5.00 per gallon gasoline by this summer, it is no wonder that you don’t see many Rocket 88s being produced anymore.
There are four reasons that gasoline prices have risen so quickly over time. As this chart based on data from the US Department of Energy shows, outside of a short term increase in prices at the end of the 1970s, gasoline prices in real terms fell between 1951 (when Ike recorded his song) until about 2003 – when they began a marked and rapid increase. Prices then fell dramatically during the 2008-2009 recession but have spiked back up to their pre-recessionary levels and beyond.
This chart is telling as it shows that the reasons generally given by politicians, pundits – and yes, even economists – for higher fuel costs do not fully explain the situation. Yes, gasoline, like all markets, is influenced by supply and demand, but demand actually fell in the early 1980s as the economy went into recession. The oil embargos of the mid 1970s led to significant reductions in the supply of fuel (us “olds” remember the joy of gas lines, and even-odd days), but in real terms prices during that period rose only back to where they were when Rocket 88 was on the radio.
In reality, gasoline prices are impacted by four key factors – only one of which is supply and demand. As the chart shows, short term increases or decreases in real prices due to supply and demand shocks can be quite large, but they are also temporary. The other explanations for price changes are more long-lasting and pervasive.
First, are taxes and regulations. According to the Department of Energy, taxes represent 12 percent of the price of gasoline, and they have risen dramatically since the 1950s when fuel taxes became the major funding source for the nation’s road network. In addition, myriad environmental regulations have both increased the price of gasoline and reduced its potency.
Another reason for higher gasoline prices is the decline in the value of the dollar relative to other world currencies. According to a report issued by the Congressional Joint Economic Committee, the weakening of the dollar since 2008 has added 56.5 cents to the price of gasoline
Finally, there is the role of speculation in energy markets. “Speculators” are the boogymen that governments seem to want to blame for higher energy prices – even though government actions seem to be the major culprit. Oil is a commodity that is traded on world markets, and like any market, the NYMEX can experience bubbles. But these bubbles tend to burst when contracts come due every month, and it is unlikely that they can lead to long-term changes in price. More likely, however, is the role of producer countries sovereign wealth funds. These funds – which are basically managed by the same people who produce crude oil can purchase and hold large amounts of crude that may never enter the world market. Considering that the governments of countries like Russia, Iran, Saudi Arabia and Venezuela are all key players in this market one might think that the potential for deceit or fraud are ripe.
So next time you sit in a gas-line contemplating the $100 that you are spending to fill-up be sure to direct your anger toward a wide array of culprits.
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