Saving Money By Cutting Out the Politicians

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Over at This Old City I have a riff on a Ryan Briggs post showing that we’d have fewer food deserts if we let PA grocery stores sell booze.

We spend some public tax dollars subsidizing fresh food and subsidizing new grocery stores in poor areas, but what Ryan’s post shows is that we could stop spending some or all of that money if we just stopped rationing the right to sell alcohol. In states where grocery stores sell alcohol, there are more grocery stores per person. It’s not rocket science – food profit margins are thin, and alcohol profit margins are fat. The alcohol cross-subsidizes the food.

One reason our political system prefers subsidies to this no-cost option is a straightforward political economy problem. With the cap, liquor licenses are an expensive asset. Without the cap, they are only worth the paper they’re printed on.

Some people spent hundreds of thousands of dollars on these things. If we uncap licenses, those investments get wiped out. We could work out some kind of mass settlement (which license holders have resisted in the past) or we could just soak the incumbent license holders and not really give a shit about it (my preferred option).

But another political dimension that favors subsidies over unwinding the license cartel is that the subsidies put a politician in the middle of the deal, and the no-cost option doesn’t.

Even if we can get more grocery stores without spending any public money, that’s not as fun for the local Mayor or City Councilmember, who doesn’t get to go to the ribbon-cuttings and get all the political credit for winning the subsidies. The grocery stores just happen.

It’s the same thing with the new Comcast tower. The tower needs some zoning variances, and allegedly needs some state and local “economic development” subsidies that may or may not just be the most expensive Tom Corbett for Governor talking point ever.

Of course the option exists to write a Center City district zoning code that allows buildings like this to get built by-right. There are some other reasons we might not want to do that – the aesthetic dimension of our city’s skyline is a public concern, arguably – but the Comcast center is far from the only building where politicians get involved in parcel-level politicking.

A great many medium-big buildings have to go through the political ringer to get approved, which is fun for politicians because they get to play dealmaker. But just like the grocery stores situation, involving the politicians at the parcel or project level, rather than just the alcohol market or real estate market rule-writing level, makes things a lot more expensive for all concerned than they have to be.


This entry was posted in Economic Development, Economy.

5 Responses to Saving Money By Cutting Out the Politicians

  1. Pingback: 1/17 Morning Buzz | PoliticsPA

  2. Gdub says:

    Why doesn’t this apply to earmarks? Same impulse–get in the middle of “making something happen” that might well have happened anyway.

  3. Gdub says:

    That would make sense if the big earmarkers were vulnerable politicians. However, the traditional big guys (Cochran, Moran, Murtha, Harkin, Feinstein, Young, etc.) for earmarks were politicians that were hardly subject to losing an election based on an unpopular policy. Instead, they got the right to funnel cash as a reflection of political power, not weakness.

    In the end, the taxpayer ends up paying extra as a premium to allow legislators the image that they are indispensable and “making it happen” for doing their jobs.

    • Jon Geeting says:

      I get that argument, but you have to think about how it interacts with other elements of the party incentive structure. Murtha got so many earmarks because he was a senior on the Armed Services committee. How do you get senior committee positions? Part of it’s seniority in general but part of it is being a good friend of the party. Freshmen then know if they cast tough votes with the party and survive a few reelection campaigns, they’ll get some good committee positions and get to dole out some goodies. If this were like a huge part of the budget I could see having a problem with it, but it’s not. It’s only really a problem when the imperative to put a politician in the middle makes the overall market dysfunctional.