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    7/3/2008
    Wigderson: Now is the time to act on Price Gouging

    Democrats love the idea of sticking it to “Big Oil.” Their presidential candidate Senator Obama wants to bring back the late 1970s with a windfall profits tax. Legislators at the state and national level want to go after the oil companies for “price gouging.” Though neither of these ideas will produce one more drop of oil nor will they lower the price of gasoline, it makes Democrats feel good because they have done “something” about the oil companies’ record profits.

    Never mind that there weren’t too many Democrats feeling sorry for the oil companies during times of low oil prices. When oil companies were losing money we didn’t hear any Democrats offering to bail the oil companies out during times of record losses. Such is the animus towards “big oil” that even at time of record prices at the pump too many Democrats are more concerned about punishing the oil companies for merely existing rather than deal with the problem.

    Of course, the oil companies will endure whatever punishment is meted out because they will merely pass on the added cost to us.

    Rather than point fingers at “big oil,” the state government can directly affect the price of gasoline. Unfortunately, it will require some amount of courage from our state legislature, which is in shorter supply than cheap heating oil.

    Absurdly, even as the Democrats are standing guard looking for price gouging, state law actually requires gasoline to be sold at price gouging levels. Wisconsin has a minimum retail markup law, requiring retail outlets to sell at a certain percentage above cost. This minimum markup law includes – you guessed it – the price of gasoline at a 9.18% markup. The law was designed to protect small retailers by preventing larger retailers from selling items at a loss in order to drive out competition. What this means is that by law gas stations are actually required to sell gasoline at a mandated profit, roughly $.34 per gallon currently.

    The absurdity of such a law has not escaped the governor and the legislature. In 2006, Governor Doyle announced that his administration would stop enforcing the minimum markup law on ethanol-blended fuels.

    The legislature should act to abolish the minimum markup law completely. It will mean upsetting independent gas station owners forced to compete at lower gas prices, something the legislature has been loath to do to this point. But it is a step the legislature can take to lower gas prices and rid Wisconsin of a ridiculous anachronism in the law.

    State Representatives Leah Vukmir and Bill Kramer have already proposed legislation (AB 820) to repeal the markup law. In this period of record gas prices, now is the time for the legislature to act.

    James Wigderson blogs regularly at Wigderson Library & Pub.


    COMMENTS

    The minimum markup law prevents the Exxons from driving out of business the mom-and-pops and then controlling the prices thereafter. It offers fair markup, which few of us object to. It should be left alone (unless you own oil stocks, then its elimination offers higher profits later.
    fox cities news, appleton, wi
    Jack Lohman (Thu Jul 03 14:32:09 2008)

    Jack -
    You have no idea what you are talking about on this one.

    The current law does no such thing as you describe. What you describe is already covered in both federal and state antitrust statutes.

    Are you suggesting that the state knows far better than two private parties participating on a mutually agreeable price and transaction for a given good and that somehow a built in profit margin is fair to the consumer?

    fox cities news, appleton, wi
    Publius (Thu Jul 03 16:26:38 2008)

    As I understand the current Wisconsin law, gas must be marked up by a minimum of 2% (or whatever the percentage is). If that is indeed the case, it is a good law. Federal and state antitrust statutes prevent collusion, not independent competition. And Big Oil has not earned my trust.

    I indeed do not trust CEOs when they have an opportunity to stick it to the people, and I think recent history bears me out. This law sets a floor, not a ceiling. It admittedly does not fit the standard "free market" approach, but I'm not liking that very much lately.

    fox cities news, appleton, wi
    Jack Lohman (Thu Jul 03 18:23:39 2008)

    Less than a handful of gas stations in the entire state are actually owned by any of the big five domestic oil companies; the overwhelming, vast majority are independently owned and operated. They are merely franchises.

    Big Oil sees little to nothing after the purchase of the franchise - and the franchise has more to do with the wholesaler than the actual name on the sign. They all get their gas from the same people.

    And your understanding of antitrust laws is woefully lacking. They deal with anticompetitive behavior including, but not limited to, collusion and monopolistic behavior.

    The WI law requires a 3 percent markup at retail and 6 percent at wholesale. These are arbitrary numbers set in statute and the whole law is being challenged in federal court where it likely will be struck down.

    And as you've exhibited, the misconceptions of what this law actually does and the nature of the retail gasoline market is widespread and you've done a disservice to the larger debate by being so ill-informed.

    And to your point about owning oil stock... Are you suggesting that pensioners should divest themselves of their interests in Big Oil as the record profits bolster their retirement security?

    fox cities news, appleton, wi
    Publius (Thu Jul 03 21:32:39 2008)

    As usual, you don't know Jack, Jack.

    This has nothing to do with the price from producers and refiners. The law mandates a price markup of 9.18% per gallon from the wholesaler and the retailer.

    This is an artificial price markup scheme perpetuated by a few politicians who - as you frequently drone on about - are in the pocket of special interests.

    Most politicians however are merely ignorant of basic economics. In other words, they are your fellow travelers in public policy debates.

    As for antitrust issues, the law was found to be in violation of the federal antitrust laws by a federal magistrate last fall precisely because it is a government sponsored price collusion scheme.

    JB Van Hollen (a tool who is too dumb to succumb to special interests and too smart to feel the weight of common sense) is currently defending the law in another court case seeking to prevent its enforcement.

    I shouldn't have been surprised to find that the same guy who doesn't understand the damage that HMOs, Medicare and CON laws wouldn't see the Mandatory Price Increase law for what it is either.

    With your keen instincts and deep insight for bad public policy influenced by money, you should think about writing a book.

    fox cities news, appleton, wi
    JimmyJohn (Thu Jul 03 21:55:17 2008)

    You guys may be absolutely right, on everything but the benefit to the public. You are assuming that if the 9.18% law wasn't there prices would go down, and they likely wouldn't. Though I will concede that it would allow a little latitude for competitive prices, I don't see that happening.

    WI gas is in line with the other states that have no such law, horrendous as they are, and I worry about anything that has Leah Vukmir's name on it. She's a grandstander. But of course, the right wingers fall all over her every move.

    I will spare readers from turning this into a discussion on health care, but your opposition of the CON is telling. You need to study up on it.

    fox cities news, appleton, wi
    Jack Lohman (Fri Jul 04 07:32:09 2008)

    With this law in place, prices CANNOT go down. Without it, consumers would at least know that the price isn't based on some arbitrary price set by law.
    fox cities news, appleton, wi
    Publius (Fri Jul 04 07:57:32 2008)

    And let me see if I have this right. Leah Vukmir, the author of this bill, also voted for "a bill that would create new restrictions on how wineries sell their vintages.” How's that for free-market competition? I don't have the time to track the money flow on this one, but with Vukmir it you can be assured that it did. (Click here.)
    fox cities news, appleton, wi
    Jack Lohman (Fri Jul 04 09:02:47 2008)

    Oh Jack, Jack, Jack.

    Prices may fall without the law. You presume that artificial price collusion would continue to exist and keep prices higher. That defies free-market reality, but I know that you are tirelessly devoted to convincing others that the free market doesn't work.

    I have studied CON laws. In fact I know a great deal about the topic. It is anti-market, pro-monopoly and is entirely driven by political manipulation by private sector investors who like to be the only ones in the market. Thats who drove it and thats what we have for it.

    And to your concerns about three-tiered liquor, beer and wine distribution - they are all anti-market, the same kinds of regulations you seem to be just fine with in health care.

    Flip-flop-flip-flop.

    fox cities news, appleton, wi
    JimmyJohn (Fri Jul 04 13:54:52 2008)

    JimmyJohn, if you weren’t so intent on criticizing what you see to be the Left, you’d recognize that there are plusses and minuses for many political actions. They use the pluses to justify their bad decisions.

    Yes, I agree that some competition could result, but you’ve already got the 9.18% savings in your gas tank. Given the oil market I doubt that’ll happen; it hasn’t in other states that don’t have the law. But believe what you want.

    The minuses remain; it could indeed end up driving the mom-and-pop franchises out of business. Some may go anyway because even the 9.18% doesn’t leave them enough profit to upgrade their pumps to accommodate the $4.00 prices. But that’s okay; the weak must be allowed to be crushed.

    If you really have studied the CON then you must already know that nowhere in history has the building of excessive beds ever introduced competition and driven down health care prices. In 100% of the cases a second hospital built in a city has increased costs! Watch what happens in Summit. And watch as hospitals leap-frog each other as they try to out-buy each other in high-tech scanners, and now that they own their own physician referral bases, expensive testing will skyrocket.

    And on the wine distribution, I agree with Troy Fullerton. But unlike right-wingers, I’ve learned to expect that good laws don’t require cash to flow but bad laws do. But you Righties just keep up your current pace; your time is running out.

    You may have seen this, and probably won’t agree with it. But here are just a few things we should do to fix the system http://tinyurl.com/2hzj65

    fox cities news, appleton, wi
    Jack Lohman (Fri Jul 04 17:13:11 2008)

    "The minuses remain; it could indeed end up driving the mom-and-pop franchises out of business."

    We've already covered this, Jack. You are talking in circles and regurgitating talking points of both the Petroleum Marketers and the Beer Distributors... (Do they give you money?)

    The minimum markup law DOES NOT protect mom-and-pops - the antitrust statutes already do that. It guarantees profit. Nothing more, nothing less. By sanctioning price collusion, the state allows those mom-and-pops to take money out of our pockets for no reason.

    If gas stations were owned by Big Oil, would you still support the law? Or are you suggesting that profit for some is okay but for others it is wrong? Oh wait, let me guess... You believe in "resonable" profits and oppose "unconscionable" prices...

    For a person opposed to profits the way you are, you're positions are hard to follow on this matter.

    fox cities news, appleton, wi
    Publius (Fri Jul 04 18:54:17 2008)

    Publius, so as not to regurgitate, let me just say... okay.... you win.
    fox cities news, appleton, wi
    Jack Lohman (Fri Jul 04 19:02:56 2008)

    Jack, Your inability to comprehend economics pretty much invalidates just about every argument you make about things like health care reform, paid-off politicians and now minimum markup.

    You fixate on the sum total of political donations for particular candidates, but you miss the purpose and result of their impact.

    For some politicians, the money is a follow-up token for actions taken, but actions that weren’t bought and paid for. This reality seems to be out of reach of your narrow intellectual grasp.

    To be sure, there are politicians that act to enhance their outreach to donors, but those would be the moderates of both parties. The conservatives and liberals of both parties may support most of the issues that make their financial constituencies happy, but they generally vote on their ideology only.

    You could wave crisp bills in front of their faces and it won’t sway them. I know this doesn’t fit your template, but that is a problem due primarily to your template and your obvious outsider perspective.

    As for CON, once again, the brilliance of the manipulators breezed right over your head.

    The law was just fine for the market players. It worked very well for them during the 70s and 80s. New market entrants were kept out. Every attempt by a competitor to expand or upgrade their offerings could be stopped by lobbying the government and all was well. Small competitors who didn’t play by the Madison rules were forced out of the market.

    If you wanted to play in the big leagues, you had to pay lobbyists and you had to donate lots of cash to politicians. Only a few could play this game, and only a few survived. When the small players were absorbed, consolidated or forced out, the big players lobbied to eliminate the law, and they succeeded to monopolize health care. Not on their own capabilities, quality, market share or competitive advantage, but through their ability to manipulate the government controlled system.

    CON gave us the virtual monopolies that now drive up costs. The difference is that those of us who understand economics, get this, and guys like you who are filled with animus and ignorance cannot even begin to see how it happened.

    The fact, Jack, is that there is no such thing as a real or sustainable monopoly. They don’t exist, and you cannot name a single one. Those that you could name were created and protected by the government.

    CON laws around the country stifled innovation and competition and in its place the government created monopolies. The same monopolies that now drive up our costs and compete in the wrong ways for business with their fellow monopolists.

    In a few ways, you are right about “moneyed politics,” but you have thoroughly missed the target on who they are and how they influenced their way into a destructive control of the market.

    CON laws in the last 30 years have harmed health care as much as the guild system of licensure for practitioners has for the past 80 years. Combine that with the disastrous overregulation of health care delivered via Medicare from the 70s forward and the Managed Care revolution of the 90s and you have a health care system that has been destroyed by the elites who kept telling us they were going to make things better.

    These same elitists keep telling us that we should trust them with the rest of the system and then it will be fine… isn’t that what you believe Jack?

    Have you looked around the globe lately? How do those systems work? Use your brain Jack. Open your eyes and your brain. Government doesn’t do ANYTHING well. Not Medicare, not Medicaid, nothing. Why can’t you see this?

    And why do you constantly ignore the power of market forces? You are obsessed with the belief that every politician will chase after a dollar bill offered by a special interest group, yet you are equally obsessed with the notion that the government must run more and more things to prevent the free market from functioning.

    You are stuck in a bizarre paradox Jack. You want less private sector influence over the government , but you want the government to have more influence over our lives. Don’t you understand that giving government more influence over our lives is the thing that corrupts government most?

    Oh, whatever Jack. You are a lost cause. I will conclude by wishing you, in the spirit of a smaller government that has less involvement with our daily lives, a happy Independence Day.

    Unlike you, I want the government out of my health care, out of my gas tank and far away from my livelihood. The less government the better. I can always do well in a free market. At least I am consistent.

    You are the fraud and sower of deceit. You don’t trust politicians, yet you demand they take over more and more of our lives. How pathetic are you that you cannot even recognize your own personal demons? Do you really want the people who you hate so much to control more of your life? Use your brain Jack.

    fox cities news, appleton, wi
    JimmyJohn (Sun Jul 06 01:22:53 2008)

    And in case I have to argue against history as you have, what do you say to people who say "Hey, where were the state and federal anti-trust busters when Wal-mart was driving out the mom-and-pop stores?" Clearly you must have something smart to say here....
    fox cities news, appleton, wi
    Jack Lohman (Sun Jul 06 06:11:02 2008)

    JimmyJohn, just what part of money do you not understand? Yes, there is some cash given to politicians after-the-fact, payola, as an expected thank-you for services rendered and a reminder that the next time the politicians deliver, cash will follow.

    Oh, sorry. I should have called that a “follow-up token!”

    I must say, that while you have a very loose set of values, you nonetheless have a very elegant way of justifying corruption. You must be a politician, hence the anonymity. Do you also “enhance [your] outreach to donors?”

    See Troy Fullerton’s link to the dollars given by Wow Distributors. This was cash up front, as is most of it. Can you say “Philip Morris?”

    “…..but they generally vote on their ideology only.” Wow. I have a bridge I’d like to sell you.

    As for CON, once again, “How are you liking health care costs so far?”

    Having been a health care provider for 25 years, I obviously have a different view. I have friends who sit on the boards of smaller hospitals who say they had the wool pulled over their eyes by the bigger hospitals that wanted in their pockets. Lied to, if you will. If they had it to do over again they would fight to keep the CON in place. Ask Oconomowoc Memorial how they are liking it so far.

    >>> “If you wanted to play in the big leagues … you had to donate lots of cash to politicians.” Wow! For you to admit that is something else. JimmyJohn, BUT THAT IS STILL THE CASE!

    You can call me all the names you want, but the bottom line is that GOOD LAWS DO NOT REQUIRE CASH TO FLOW, ONLY BAD LAWS DO!!!!

    If cash were not flowing, the CON would still be in place. But cash did flow and it was thus rescinded. If cash did NOT flow but politicians rescinded the CON on their own, I’d be more inclined to accept the decision. A stupid one, perhaps, but not a “bought-and-paid-for” decision.

    >>> “CON gave us the virtual monopolies that now drive up costs.” Give me a break. Have you not followed the increase in costs since the CON was removed? Have you not followed the increase in conflicts of interest since the CON was removed?

    >>> “CON laws around the country stifled innovation and competition and in its place the government created monopolies. The same monopolies that now drive up our costs and compete in the wrong ways for business with their fellow monopolists.”

    That’s total BS. The VA and armed forces systems, monopolies both, are far more efficient than our private healthcare system. Even Medicare, which uses private doctors and hospitals, is more efficient than private insurers. I’ll take “overregulation” any day (I was a Medicare provider who was never stiffed or underpaid by Medicare, and now on the Medicare system as a patient).

    It’s too bad that I am fighting for a different segment of our population that you are.

    >>> “Government doesn’t do ANYTHING well.”

    Yeah, they have their problems, but it’s because the CEOs and fat cats own our politicians through their campaign contributions. Why is the Department of Defense overpaying its private contractors by at least 50% and in some cases by 1000%? Follow the money. Check the cost overruns and the thousands of ex-government employees who are now with the private contractors. But don’t you worry, it’s just taxes they are spending.

    Government would be just fine if the politicians were not in the pocket of the lobbyists and corporations. But that’s the moneyed system you support.

    >>> “ You want less private sector influence over the government , but you want the government to have more influence over our lives. “

    If the private sector had LESS influence over the government, the government would be more beholden to the people it is supposed to serve. As it is the politicians are beholden to their funders. And if they weren’t, those funders and their cash would dry up. CEOs may be greedy, but they aren’t stupid. They wouldn’t give cash if it didn’t work.

    If we had public funding of campaigns, we’d attract a different mentality and motivation in candidates. Right now it’s a stepping stone to bigger corruption. We don’t like this in Mexico but we accept it in the US. Go figure.

    And beyond our disagreement, JimmyJohn, I am at least willing to discuss these issues without hiding behind the anonymity of the internet. Here’s my complete disclosure.

    “How pathetic are you that you cannot even ….” uh, at least disclose your corporate or political position? C'mon, JimmyJohn, you can do it.

    fox cities news, appleton, wi
    Jack Lohman (Sun Jul 06 08:42:09 2008)

    So, JimmyJohn, I hit the nail on the head. You are a state legislator (or staffer) that was caught up in the CON vote and the campaign finance corruption, and you're not real happy with my take on them. Well, so be it. The conservative reign is coming to an end. Get your resume updated.
    fox cities news, appleton, wi
    Jack Lohman (Mon Jul 07 01:35:29 2008)

    "Hey, where were the state and federal anti-trust busters when Wal-mart was driving out the mom-and-pop stores?"

    What laws did Wal-Mart break? Offering products that people wanted for less cost? Oh, the humanity!

    Did you cry for the buggy makers, too?

    fox cities news, appleton, wi
    Publius (Mon Jul 07 11:22:58 2008)

    I'll disclose my political affiliation:

    I'm a Republican who is dissatisied with people who were supposed to protect the brand, but instead liked catering to special interests.

    I'm a Republican who believes that the best way to remove special interests is to shrink government that it no longer has special interests seeking favors from government.

    I'm a Republican who loathes the fact that certain people try to manipulate policy discussions by inserting, "Well, I used to be a Republican..."

    fox cities news, appleton, wi
    Publius (Mon Jul 07 11:26:11 2008)

    So let’s see if I have this right: If Exxon undercuts the mom-and-pops the trust busters will get after them, but if Wal-mart does it, they are “Offering products that people wanted for less cost…”

    I see. When you put it that way it is easier to understand.

    Publius, I knew you were a Republican, are you a (a) legislator, (b) staffer, (c) blogger, (d) or business leader?

    I’m a McCain Republican, and I realize that’s almost like not being Republican, but you call me what you want. On the legislative side I'll be supporting the Dems.

    fox cities news, appleton, wi
    Jack Lohman (Mon Jul 07 21:25:53 2008)

    Jack, your formula for reform, is and always has been WRONG.

    Your answers for health care, are silly, and are failing. Medicare is failing. Government-run health care is failing.

    In your continued blathering, you still have not explained why government should run health care, or why the very people you trust (rightfully) the least, should manage something that matters so much.

    Please explain.

    fox cities news, appleton, wi
    JimmyJohn (Tue Jul 08 01:37:26 2008)

    JimmyJohn, there’s only one problem with the current “government run” health care system (Medicare), and that’s because the it is being controlled by corporations through their campaign politicians to politicians. Corruption! If we stopped the cash flow to Congress and put Sensenbrenner et al under Medicare – which congress has the option to do under HR676 Medicare-for-all – we’d fix health care overnight. You can see our efforts there at www.BusinessCoalition.net.

    The same is true of passing Healthy Wisconsin. Both approaches should be run by a non-partisan board like the Federal Reserve, with staggered 14 year terms. But in all cases these programs should use private hospital, clinic and physician contractors.

    Yes, politicians are a problem, but that’s because of our corrupt electoral system, which the Republicans like a lot and have prevented from being reformed. Republicans lost their chance to fix it, and now they are on their way out.

    fox cities news, appleton, wi
    Jack Lohman (Tue Jul 08 06:00:18 2008)

    Correction:

    ....and that’s because it is being controlled by corporations through their campaign contributions to politicians.

    fox cities news, appleton, wi
    Jack Lohman (Tue Jul 08 06:32:13 2008)




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