I Do Not Like These Changes

Take the Liquor Code out behind
the Capitol and beat it to death.

Watchdog.org asked me what I really thought about the PLCB and the Almighty Liquor Code in light of recent changes (the ones Governor Wolf said were "historic").

So I told them.

Favorite bit?  “If privatization means less booze-based revenue for the state, well, fine, let them find it in someone else’s pockets for a change. Moderate drinkers have paid more than our fair share for long enough."

Privatization IS Modernization. Rewrite the Code; the WHOLE Code!

Wolfonomics: competition causes higher prices

Governor Wolf, the businessman who knows how to get things done, who can reach across the aisle and find common ground with the opposition, is not a stupid man. However, he must think we are.
For a guy that wrote about “Conflict and Organizational Accommodation" for his Ph.D. dissertation, he doesn't seem to be to very "accommodating." As reported in numerous newspapers, the Governor's "My Way Or The Highway" approach is blocking progress.

"That's MY way over there; the HIGHWAY is over there."

His interview in Keystone Q & A gave us a warning when they asked:"How much of the budget that you introduced do you hope to see as an end product?" and he answered "All of it. It actually is a holistic program not meant to be cherry picked," Which means he isn't willing to compromise, at least not in the way I understand the word. Of course, that is a flip-flop from his inaugural address, when he said, "We have to believe that none of us alone has all the answers—but that together, we can find an approach that works." I guess he forgot to add "except for the budget."

As a college-educated man he had to take a few business courses, like accounting or economics, at some point in his academic career. One of the things you learn in those classes is that monopolies are inherently anti-consumer due to:

1. Higher prices than competitive markets
2. Decline in consumer surplus
3. Less incentives to be efficient.

They are so inherently anti-consumer that there are laws prohibiting them. Then there is that whole idea of centralized planning; that worked so well for the eastern bloc and Soviet Union. You remember that: where the government decides what you are allowed to buy, where you will buy it, and how much should be made available. Sorta like the PLCB. 

Centralized government planning is known for:

1. Being poor at predicting future trends
2. Having a lack of incentives when income is guaranteed
3. Being inflexible, with difficulty responding to shortages and surpluses

What is really ironic about centralized planning is the theory that the government will be able to overcome market failure and achieve equality of distribution...thus preventing monopolies from emerging to exploit consumers. Pretty funny considering our home-grown Fossil of Prohibition, the Relic of Repeal, the State Store System.

The Governor's reasons for vetoing liquor privatization really call into question what he thinks of the citizens of the Commonwealth. As noted in the Washington Post's blog (how badly does a Democratic governor have to screw up to be called out by the Post?): "Pennsylvania’s governor doesn’t understand economics (or won’t admit the real reasons he vetoed ending state liquor monopoly)."

It's bad enough that the PLCB treats us like children, but now we have the Governor doing it too. The piece in the Post quotes the Reason blog: "Wolf and his fellow Democrats 'warned that prices would rise as private businesses sought profit.' In other words, private merchants will jack up prices because they want to make money—unlike the Pennsylvania Liquor Control Board (PLCB), which seeks only to raise revenue." Except competition -- as 200 years of economic theory and experience prove -- drives prices down. When Wolf ran his family business, Wolf Furniture, did Wolf raise the price of his cabinets to be more competitive? Or did he lower them? Is this the dawn of Wolfonomics?

The Governor specifically mentioned, "In the most recent case of another state that pursued the outright privatization of liquor sales, consumers saw higher prices and less selection.” He's clearly talking about Washington State. Their higher prices wouldn't have anything to do with the 27% in new fees that came with their privatization plan, would they? You know they would, we've told you that, time and time again, and backed it up with fact, not speculation. More Wolfonomics: apparently competition somehow causes higher taxes, not government!

And the notion that selection has decreased for Washington's citizens is simply absurd. The number of stores increased almost fivefold, and true superstores entered the market, stores with more products on the shelf then the entire state control system stocked. You can see the same thing in New Jersey at any Super Buy Rite, Total Wine, or Joe Canal's. There are stores like these all across the country, and there is no reason they won't be in PA too (despite what you may read in comments sections of news stories). The Commonwealth Foundation had a nice synopsis posted that you can read here.

It was the Pittsburgh Post-Gazette that put it best, though: "Since [Governor Wolf] is now the sole person standing in the way of this historic privatization, the governor has earned the right to have the state stores named in his honor." 

We agree. Welcome to:

Unchanged for 80 years!

I would ask the Governor to put his business hat on and take this simple test. If you wouldn't put a system like the State Stores into place today... why do you want to have it tomorrow?

We all know the answer. No one really wants this system except the people who directly (or indirectly...through campaign contributions or dues) benefit from it, but it is because of those people and their outsized influence that Wolfonomics had to come into being. We don't want it, and you know we don't, and as a business owner you can't really want it. Do the right thing, Governor.

End It, Don't Mend It.

(Wolfonomics - a system of economic theory that reverses 200 years of thought by presupposing competition increases prices. Or "Everything you know is wrong"  Feel free to use it whenever the Governor talks economic policy.)

"I am a producer of fine wine..."

I just got this comment on another story I posted today, and I thought it deserved fuller treatment, so I'm putting it up as a post. Unfortunately -- but understandably -- it was an anonymous post, but I've heard similar stories from other importers and producers. They've all warned me that they must remain anonymous, because the bureaucrats at the PLCB are vindictive. I know this from personal experience; I've seen them retaliate against producers who have talked to me. So...no name, even though that diminishes somewhat the poster's credibility.

Their credibility is, however, enhanced by their clear passion about this issue. This is a point we've tried to make a number of times: this is NOT about killing union jobs, this is NOT about making it easier to get cheap buzzbooze, this is NOT about beer in supermarkets. What this is about...is choice, and how the PLCB denies it to Pennsylvanians. At least, to those of us who don't live close to the border. Many of us simply cross that border and take privatization, since the Legislature won't see fit to give it to us.

The winemaker has the floor.


I am a producer of fine wine. I sell wine in 35 states. We sometimes are able to sell wine in PA, but there is no other state I work in that operates like PA. We have to get through the PLCB, regardless of whether or not our wine is wanted by citizens. Unlike every other state I work with, PA has an organization that can limit access to our wine because they don't want to buy it, don't like the price I have assigned to it, or for whatever reason, they simply don't want to work with me.

I don't think that most Pennsylvanians realize how their access to fine wine is severely limited by the PLCB. Even when I know for a fact that I could be selling wine in PA, because people have contacted me and specifically said so, I am sometimes unable to do so because the PLCB refuses to purchase. The PLCB arrangement in PA consolidates power in the hands of one org, and many times in the hands of ONE individual. If I have a good relationship with this individual, I'm able to sell wine just fine in PA. If for some reason this individual doesn't like something I've done, like raise prices, then he/she can simply not buy. And he/she (the PLCB representative) is my ONLY option for selling wine into PA at the retail level. (There are exceptions for restaurants, but it is nominal, and honestly, a huge hassle.)

In most states, if a distributor is willing to take you on, that distributor then purchases your product and goes out into the market and sells it. Maybe it sells. Maybe it doesn't. That responsibility falls on the distributor and me. And if that distributor decides to decline to purchase your product or starts to perform poorly, then you have other distributors to choose from.

In PA, you can't even sell your wine to people who want it, unless you schmooze with the PLCB and give them their cut. So, in effect, PA citizens get taxed twice by their state government. I can think of no other example other than a mafia that works like this.

And the only producers of wine that are okay with an arrangement like this are massive producers of wine like Gallo and Constellation, who make millions and millions of cases of wine and grease the skids with the PLCB and lobby the state government and have so much low end wine that people want that the PLCB can't really say no to them. In the eyes of these massive producers, leaving the choice up to one individual who simply can't say no to them is a huge victory. They love an arrangement like this. It keeps producers like me out of the market and all it is is competition between their own brands. False competition, given that all the wines are ultimately made by the same company.

Lastly, the idea that a bunch of jobs would be lost or a bunch of deaths would all of a sudden occur is simply preposterous. If that was the case, the rest of America would be mayhem, as PA is one of the few states that inserts the state government into the selling of wine to this degree. And other states are not mayhem. They operate just fine, and there are plenty of jobs. The real difference between PA and most other states is that in most other states you have a much better and broader selection of wines to choose from when you go to a wine shop.

Crunch Time -- A Bill is in Debate

I don't have time to explain why I've been silent here for over six months -- a lot of it was work, and some of it was that I did a lot of talking on Facebook, which I now realize was wasted -- but that's not important right now. What is important is that HB 11, a privatization bill, is being debated in the Pennsylvania House today. Debate began last night, and continues this morning. That's exciting, but...the bill needs a LOT of work.

I've got some suggestions. Oddly enough, I got into an email discussion with Jon Geeting, who's involved with the Keystone Politics blog, "Pennsylvania's source for liberal political news and commentary." Jon's an example of why this is not your typical privatization battle, which usually lines up as liberal vs. conservative, free marketer vs. union supporter. Jon recognizes that the system we have is not as it should be, and while we don't see eye-to-eye on the taxes -- though we're not 180 degrees opposed -- we agree on a lot about the state's dysfunctional liquor code.

As I said, we got into a discussion recently, and came to six points that we agreed on, and think should be in any Pennsylvania booze privatization bill. Note that there is nothing in here about the actual end of the State Stores -- except that point 1 covers that effectively; they won't survive the competition -- or the union, because that's up to the legislators. Jon posted them yesterday at Keystone Politics, and I realized that it was time to blow off the cobwebs here and get back in the game. Here are the six points. They're somewhat controversial...in Pennsylvania. In other states, they're ho-hum standard.

1. Let supermarkets sell beer, wine and liquor, effective immediately. -- In Portugal, they sell bottles of whiskey in coffee shops; you can buy beer in supermarkets in most of the states that border PA, you can buy champagne at convenience stores in Virginia...and yet, no one's rioting in the streets. What's the big deal?

2. Charge a flat fee to any business that wants to sell booze – no cap on licenses. -- Pennsylvania's licensing system is broken, it makes no sense for the state, and the artificial limits on licenses penalize areas that are experiencing growth. Liquor licenses sell for upward of $300,000 in some counties...and the State sees only a puny annual fee from that. Get smarter: charge what a license is worth, and charge it every year.

3. Tax volume, not value. -- Pennsylvania's hated Johnstown Flood Emergency Tax is not going away; the State gets revenue from that tax, and booze taxes are an unfortunate reality. But most other states have a gallonage tax, that is placed equally on wine and spirits by the "proof gallon," a measure of volume of alcohol, rather than the way Pennsylvania does it, which is by a percentage of the price. What Pennsylvania's tax does -- unintended consequences -- is make blotto booze (cheap wine, cheap vodka) even cheaper, while making better booze even more expensive. If we're taxing alcohol for some health or moral reason, the gallonage tax is more honest; if it's just about raising revenue...well, why not put an excise tax on everything and share the pain?

4. Allow Pennsylvanians to buy wine, spirits, or beer in other states, or through the mail/Internet from anywhere, without penalty. -- End the police-enforced monopoly. This is pretty simple. The only reason this unAmerican, anti-federal "stop you at the borders" law is even allowed is because of an overactive interpretation of the 21st Amendment. After all, I'm allowed to buy gas, food, books, clothing, whatever I want in New Jersey or Ohio; why not booze? We're American adults; we deserve to be treated that way.

5. Allow any authorized retailer to sell beer in any volume they desire, without fake restrictions. -- End the case law. Now. End all artificial restrictions on how little beer someone can buy in a single purchase, as well as how much. The case law and its tavern corollary, the "two sixpack" law, make no sense. They are there as a favor to business, not for any kind of health reason, and certainly not for the Pennsylvania consumer. Or the Pennsylvania voter. The Legislature has fiddled around for years over this simple change. Shut up and do it.

6. Open up the wholesale market to more competition. -- More wholesalers means more competition, which means better prices and service. Charging $100 million for a wholesaler license is not a way to get more wholesalers. End state-required exclusivity contracts for products; if a wholesaler and producer/importer want to enter into an exclusivity contract, that's up to them and their lawyers, but the State has no interest in mandating it. Another law that was written by the industry...and it's about time we got laws written for the consumers.

These six points will make me no friends in the industry. They completely upset the apple cart, and may ruin long-established family businesses. But they will create new businesses, and the solid family businesses will thrive and succeed...as long as big businesses, chain retailers, aren't allowed to write this privatization bill.

We get one shot at this. Get in touch with your Representative now, today! Tell them you want a better privatization bill. You want a fair privatization bill. You want them to work for you.

Wine Drinker? Take a look at these

I know I haven't delivered on the reasons why wine drinkers should be in favor of privatization. I just don't know enough about it. Besides, there's that big safety valve in southeast PA; the biggest concentration of population in the state is right up against two state borders, and the liquor stores right on the other side keep folks from getting too angry about the PLCB. I really wonder if privatization wouldn't already be here if the BLCE did serious border patrols...

Anyway, here are two good recent pieces about how the PLCB affects wine drinkers. The first, by Dave Falchek at the Scranton Times-Tribune, is about how the PLCB warps even the forces for freedom in the wine world: Free The Grapes won't fight for freedom in PA. The second, by freelance wine writer Mark Squires, is just a flat-out screed about why the PLCB is obsolete, why it's bad for wine and wine drinkers, and why it simply has to go.

Read up! And catch me this Monday on the 10 AM show of WHYY's Radio Times (91 FM in Philly, or listen online at www.whyy.org); I'll be providing counterpoint to PLCB chairman PJ Stapleton's alternatives to privatization. Should be fun...

Nice summation

Take a look at this "Liquor Privatization Roundup" from John Geeting at his Lehigh Valley Independent blog. The payoff is key: "Restricting the PLCB's mission solely to public health regulation is the best option for the largest number of consumers, while the current system is only good for a handful of public liquor store employees and rent-seeking liquor license holders."

Other people are thinking and writing about this a lot more. Keep it going. I'll try to do more...to keep it going.

"There is no such wine."

David Falchek blogs about wine ("Empty Bottles") for the Scranton Times-Tribune, and does a nice job. He also...doesn't think much of the PLCB and the State's monopoly on booze sales. Read this classic tale of just what I'm talking about when I say that the State Store System doesn't exist to serve the citizens or to "protect" them through "control." It exists to serve the State and the employees; it exists to take your money.

Big anti-PLCB piece in Philadelphia Weekly

The issue of Philadelphia Weekly that came out yesterday features a lengthy anti-PLCB screed by Tom Cowell; nice work. (There was a good editorial on the wine kiosks the day before in the Lebanon Daily News, too.) The blog got some mention (bottom of page 2), but much much more importantly, Cowell had clearly been reading it and getting ideas: the number of stores compared to Chicago, how relatively little money we actually get from a complete monopoly on booze sales, the stupidity of the rebranding scheme, the way the PLCB is really just the tool of the legislature.

Which is exactly why this blog is here, to inspire thought and action. Cowell took it and ran with it, talked to union head Wendell Young, found some more issues (the patronage inherent in the State Store System, for example), and got a new crowd of folks stirred up. I'm very happy to see it happen.

Keep spreading the word. PRIVATIZE IT NOW!

(And if you feel like supporting me in the comments to this piece...feel free, but remember to keep it on track: it's all about abolishing the PLCB and rewriting The Almighty Liquor Code!)

"More proof: State should exit liquor business"

That's a quote from the Harrisburg Patriot-News editorial page. They're citing a study from the Commonwealth Foundation for Public Policy Analysis (full text of the study is here, and it's worth a read), a libertarian-leaning PA think tank, that found...well, essentially found what I was saying here, and then backed it up with facts and citations. They found that Pennsylvania's "control" of liquor and wine sales had no social benefit for the state.

Here's what the summary of the study says (all emphasis (except as noted) added by me, cuz that's what I do):

...arguments might be made for state control as a means of achieving some desired social outcome. In Pennsylvania's case, 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 [their emphasis]. Divestiture of Pennsylvania's state liquor stores would represent a financial windfall to the state, while posing no threat to public safety, as it would not result in the social ills many opponents of privatization fear.

Now. If all that's true, and it certainly would seem to be -- they've compared it the best way possible, looking at other states with similar and different regulations -- why do we keep the State Store System? It's not about protecting you from yourself. It's about the money -- oh, sorry, I mean the revenue. (Because the State doesn't take your money, they enhance the revenue flow.) And we already knew that. So if we're going to make the same (or better) in taxes under privatization, and there's no horrible effects of drinking too much under privatization lurking, and privatization could make the state a huge windfall and create a lot of jobs...what the hell are we waiting for?

As the editorial concludes: "It is no longer 1933. It is time for the state to get out of the liquor control business."

"Pennsylvania's Most Popular 'Whine'"

I don't want to infringe on any copyrighted material, so I'm not copying/posting it here, but you have got to take a look at this editorial cartoon from Rob Rogers at the Pittsburgh Post-Gazette about the PLCB. I saw it in this morning's Inquirer where they ran it as the main editorial cartoon. Pittsburgh's press has been running some very critical reporting on the PLCB; bravo! Now the Inky picked this up... Are we getting a wave here, a rising tide?

"They sure sound like bold thinkers"

Pittsburgh Tribune-Review columnist Eric Heyl put a column out a few days ago on the PLCB's $3.6 million makeover that is just too funny and too spot-on accurate to be missed. Go take a look. Laugh for a while, then remember that he's talking about $3.6 million of your taxes (I'm assuming it's mostly PA residents reading this; if you're not, well, just get pissed on principle). Not so damned funny anymore, is it?