Privitizing Liquor Stores

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bubbahotep's picture
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Sure, Governor Corbett's plan to sell liquor stores sounds like a great idea but I've heard little of how localities will be protected from making alcohol potentially a whole lot more accessible.  That may not be a problem in some areas, but it sure is for those with a lot of colleges and universities nearby.  Whatever plan they do come up with should have some protections for localities like ours.

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politeia's picture
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When I was in college in a small town in upstate NY, the state of NY had privatized alcohol sales. The drinking age was 19 and liquor could be bought at mom and pop shops, and beer and wine at mini marts. New Jersey has done this since I was a kid. Maryland does it. The vast majority of states do it. It’s an arcane system in PA.

I do not see a problem with this. College kids and teens can always get their hands on booze even with a state store system. Certainly was not a problem when I was a teenager in Lower Merion.

The benefits in regards to job creation and better prices and choice for consumers far outweigh this minor concern.

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Is there any evidence to suggest that the state store system does a better job of restricting access to alcohol for underage and/or problem drinkers? As far as I can see, all the state store/beer distributer system does is restrict access to those of us of legal age who would prefer more convenience, better selection and more knowledgeable service.

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bubbahotep's picture
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Ever hear of nuisance bars?  They are a real community headache.  I've never heard of nuisance state stores. 

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politeia's picture
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Ever hear of nuisance bars? They are a real community headache. I've never heard of nuisance state stores.

What Corbett is proposing will have no affect no bars.

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Brotherhood of Thieves ~ As we must account for every idle word, so must we account for every idle silence.

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bc59's picture
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as if alcohol isn't already readily accessible to college students LOL 

let's privatize ASAP

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outtathere's picture
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Since the motivating factor for this attempt at privatization is revenue generation, economics, I prefer to restrict the argument to just that parameter and leave other factors out of it.

Some say that selling the system may net $2 billion . Corbett strongly favors it.
Not so fast, LCB officials say. They dispute the $2 billion estimate; they note that the agency last year kicked in $481 million in revenue ; they brag of funding drug and alcohol programs and state police enforcement efforts.

Seen in that light, foregoing proven annual revenues of close to half a billion for a one-time grab of 2 billion fails to make financial sense in my book.

And the current annual revenues generated by the State Stores are the only thing that is provable. The 2 billion windfall is an estimate. Any potential spinoff (trickle-down?) economic benefits and the job 'creation' and income tax revenues therefrom are also only projections. And statistics and projections have a tendency to be massaged or cooked into demonstrating whatever the proponent presenting them is attempting to demonstrate.

So no, not a very conservative move in my estimation. Conservation means valuing and holding on to what you have.

Somewhat ironically, it was none other than a labor leader , Samuel L. Gompers , the first President of the American Federation of Labor (AFL) who famously said: Better to have bread and butter in the here and now, than pie in the sky in the by and by."

Goes to show that Conservatives do not the market cornered on good financial sense. In fact, what with the sorry mess we find ourselves in after having chased after pie in the sky for decades, living beyond our means and running up astronomical indebtedness all the while, it is high time that the political hacks, both 'conservative' and 'progressive' , who tax and control us, begin to exhibit just the barest trace of fiscal prudence.

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I don’t see it as being that simple. While I would need some harder numbers, you get a one-time revenue gain and then you get all the tax revenues from private liquor stores. Let mini-marts and the like sell beer and you get even more tax revenues.

You also create jobs and due to competition the prices go down for consumers and selection goes up.

I can’t see the government doing this better than the free market, and a thriving free market will provide even more tax revenue.

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Of the $481 million in revenue, $353 comes from excise taxes.  If we privatize that number shouldn't change, unless you think privitization will result in LESS liquor being sold.  $2 billion for giving up $128 million in "revenue" - that sounds closer and is probably still too conservative an estimate since the new stores will hire people and pay taxes, etc

Having lived elsewhere, there is no progressive, liberal or conservative in any other that of the union that would trade what they have in their states for what pennsylvania has.  It is just a stupid idea to have some bureaucrat in Harrisburg decide what wine I can buy, where I can buy it, how much it costs.  Especially here, when Delaware is a 40 minute drive away...

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It is a monopoly they own that generates 1/2 Billion in revenue.  If private they would only get at max 35% of that revenue from taxes.

This idea goes back 30 years and would help monetarily in the short term but not in the long term.

'Opponents on privatization argue that the PLCB is the goose that lays the golden egg, and although the Commonwealth would quickly gain $1.7 billion by selling the liquor stores, keeping the stores public would generate significantly more money over time.'

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politeia's picture
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Well, I Googled around a little.

First This:

In 2007, Reason Foundation members testified before the Pennsylvania Legislature regarding privatizing Pennsylvania’s state-run liquor stores. Their testimony, equally true for Utah, noted:

“First, ongoing revenues will not be negatively impacted. Taxes on wine, beer, and spirits don’t go away with privatization. Any revenues that are collected from licensing bars and restaurants will also continue to flow ... . In addition, a new form of revenue will be generated through privatization — licensing of new retail stores … . Further, private establishments also pay income and property taxes representing additional revenue streams to state and local governments.”

Then This:

While only three states, including Pennsylvania, still have a government monopoly on the sale of wine and liquor at the retail and wholesale level, the notion still faces strong opposition. However, studies and real-world experience with liquor reforms in other states demonstrate the main criticisms are unfounded.
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A second myth used by defenders of the current system is the state will lose revenue. Wine and liquor sales generate revenue through two sources-liquor taxes (approximately $376 million annually) and state store's "profits" (approximately $90 million annually).

Under Rep. Turzai's proposal, the state would auction off inventories of state stores, as well as 750 retail stores licenses and 100 wholesale distribution licenses to private companies-estimated to bring in almost $2 billion. With another $500 million expected annually by requiring biennial license renewal fees, state alcohol taxes and in new taxes not paid by government entities, such as corporate income taxes and property taxes-and an end to border bleed-this proposal would likely generate more state revenue than is produced by the current system.

Government never does anything as cost effectively as the free market and a competitive private sector.

Privatizing liquor is a win all around. The state gets more revenue, more jobs are created, there is a better selection of spirits and they cost less at more convenient locations.

But hey, I guess 47 other states have no idea what they are doing. Why are they not rushing to make alcohol sales a government monopoly in their states during this economic crunch?

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dmuth's picture
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Since I don't have any front page graphics that are related to alcohol, we'll have to do with this one:

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politeia's picture
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That’s enough to make me drink Shocked Sticking out tongue

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The Commonwealth Foundation addresses two key issues with regard to privatizing liquor control board. It is the Unions which control liquor store labor and profit from dues paid by employees who are paid by the State.

  The Free Market Commonwealth Foundation addresses two key issues:

While only three states, including Pennsylvania, still have a government monopoly on the sale of wine and liquor at the retail and wholesale level, the notion still faces strong opposition. However, studies and real-world experience with liquor reforms in other states demonstrate the main criticisms are unfounded.

1)     1)  The main concern of critics is that privatization will increase underage drinking, binge drinking and DUI fatalities. This is simply not the case. A study by John Pulito and Dr. Antony Davies of Duquesne University found absolutely no link between these social behaviors and the level of state control. Similarly, states moving from government-run liquor stores to licensing of private retailers saw little change in these areas.

2)      2) A second myth used by defenders of the current system is the state will lose revenue. Wine and liquor sales generate revenue through two sources-liquor taxes (approximately $376 million annually) and state store's "profits" (approximately $90 million annually).

Under Rep. Turzai's proposal, the state would auction off inventories of state stores, as well as 750 retail stores licenses and 100 wholesale distribution licenses to private companies-estimated to bring in almost $2 billion. With another $500 million expected annually by requiring biennial license renewal fees, state alcohol taxes and in new taxes not paid by government entities, such as corporate income taxes and property taxes-and an end to border bleed-this proposal would likely generate more state revenue than is produced by the current system.

 

For more see http://www.commonwealthfoundation.org/research/detail/private-liquor-stores-a-reason-for-cheers and related articles at Commonwealth Foundation www.commonwealthfoundation.org  


 

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bubbahotep's picture
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Yes, the private sector that brought us things like this or this?  Oh I am sure we can trust them to do what is right.

Bob, no surprise the conservative Commonwealth Foundation would support selling off liquor stores.  They are what we moderates call "corporate shills."  They would have you believe lead toys from China were a good thing if someone made money off it.

Personally, I am ambivalent to whether or not liquor stores are state owned.  Despite the Commonwealth Foundation's spin, liquor stores can be and are problems for local communities.  As here and here.

Even if you don't believe they are a problem now, they could be and I've learned two things from this list

1) Don't trust government

2) Don't wait for problems to become problems

We have a liquor store in Narberth.  What if that was bought up by someone with the civic mindedness of the people trying to put up billboards in Haverford?

The fact of the matter is that liquor stores could become problems and localities and or regulators should be given sufficient powers (and money) to deal with them.  That should be written into the law for this proposal.  We cannot just expect that these protections will just happen.  Our elected officials should address it so liquor stores don't become problems.

Sure, Corbett may get a couple billion to temporarilly plug a budget hole so he can seek higher office.  Those of us that have to live the consequences should be assured that we don't get stuck with long term problems!

 

 

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politeia's picture
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Bubba, once again you give examples in your links that have nothing to do with the free market.

Wall Street banks and Halliburton have achieved “regulatory capture” of the government via crony capitalism/corporatism and they get government to write regulations that benefit them (or not write regulations that would harm them) and this in turns harms the free market and helps cause things like the economic collapse we had.

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As a consumer of alcoholic beverages it would be nice to be able to get whisky, wine and beer at one store.  It would be nice if the selection of wine in PA matched that of what is on the shelf in NJ and DE, especially the french wines.  It would be nice to be able to buy beer individually or by the 6 pack since there so many fine beers out there now-a-days (and ones life is only so long) vs. having to buy a case of one type of beer.  It would be nice to have a selection of international/european beers and hard alcohol that seems to be on hand in the NJ stores and in DE, but not in PA.  It would be nice to pay 10% to 20% less here in PA (alcohol is cheaper in NJ and DE) but I won't hold my breath for this to happen even with privatization.

If PA could accomplishs these basic things I would be all for keeping state stores, but they can't or won't, so to hell with them - it is time to privatize! Beer Beer Beer Beer

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Willey,

I think your time has come. Public opinion seems to be overwhelmingly in favor of privatization.

I'm not looking for any wonderous economic benefits though.

Yeah, there will be a onetime windfall of approx. $2 bil to plug the $4 bil gap in the budget.

Thereafter? The actual contribution of net profit that the State Stores are feeding the General Fund appears to be around $90 million as opposed to the $480 million the LCB was barking about. (the remainder is taxes on liquor which will not change)

So in order to replace that $90 mil in net profit with $90 mil in Corporate Income Tax on the net profit of private businesses, the free market really will have to perform the magic I keep hearing it is capable of - and then some. Private liquor stores will have to produce $900 mil in net income since the Corporate Tax Rate is 9.99%

Then there's the roughly 3500 beleaguered State Store employees to consider. Currently, full timers are pulling down $30,000/yr. plus the requisite annual tribute payment to Big Medicine plus pension. Now despite being represented by a greedy union, they're not really living large. In fact, according to the 2010 Federal Poverty Guidelines, a State Store employee can support him/herself, a spouse and four kids at the POVERTY LEVEL on that amount.

Now from reviewing national figures of what the average compensation of liquor store clerks is when provided by the magical, competitive free market, it tracks right around the minimum wage. So a free market, non-unionized clerk can support themself AND a spouse OR one child BUT NOT both to find themselves at the POVERTY LEVEL and thus eligible for food stamps and stuff.

Now the magical free market cannot legally pay it's employees LESS THAN the minimum wage, so it only stands to reason that when Obama's 'reforms' kick in and liquor store owners are forced under penalty of law to make annual tribute payments to the health industry , the price of liquor will shoot up.

After all, someone has to pay these freespending SOB's hunkered down in their Taj Mahal facilities working with the absolute cutting-edge, state-of-art equipment. Certainly can't expect them to bite the bullet and do more with less like the rest of us. So some of the burden will get shifted to you every time you take a drink, even though you are already paying your own annual tribute to the health industry or your compensation is reduced equivalently by the employer who is paying the tribute on your behalf .

So far as beer sales go, little chance that will be included in this upcoming legislation. The bars and beer distributors have their own interests to protect and they spend megabucks on lobbying to protect them.

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politeia's picture
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I still have to work some numbers and will get back to this, but I doubt the Commonwealth Foundation is fudging their numbers.

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I didn't really see any fudged numbers by the Commonwealth Foundation. In fact, the $90 million net profit figure looks dead on from the three or four articles I've read. It was my oversight initially when I made the first post not to question the $480 million figure the LCB was counting as 'revenue' which in fact includes all the various taxes they collect on sales. My mistake for relying on the Inquirer 'reporter' to actually do some 'reporting' and question things like that. Reporters are turning into mere narrators.

Now here again is Turzai's pitch as relayed by the CF so any fudging would seem to be his:

Under Rep. Turzai's proposal, the state would auction off inventories of state stores, as well as 750 retail stores licenses and 100 wholesale distribution licenses to private companies-estimated to bring in almost $2 billion. With another $500 million expected annually by requiring biennial license renewal fees, state alcohol taxes and in new taxes not paid by government entities, such as corporate income taxes and property taxes-and an end to border bleed-this proposal would likely generate more state revenue than is produced by the current system.

I'll let the 2 billion stand since there are no details and nothing concrete to grasp onto.

Looking at the $500 million.....

Biennial License Renewal Fees?

Who knows?

State Alcohol Taxes?

The State already collects all kinds of taxes on alcohol so that will not change unless Turzai is referring to what I saw one promoter say speculating that they could maybe RAISE alcohol taxes since retail prices will allegedly be much lower.

Corporate Income Taxes?

I already covered them. $90 million divided by the 9.99% corp rate = $900 million in net taxable income that will have to be produced to replace the $90 million net income produced by the State Stores.

Property Taxes (not paid by government entities)?

Knock that one right out of the box since the LCB are lessees. They don't own any store properties that I know of so the current owners are already paying property taxes on them.

(See that? This is the sort of thing I was referring to when I said your friends are blessed not to get involved in political things. When you do, you wind up slogging through so much calculated deception and unadulterated BS that you have to keep you waders on at all times)

Border Bleed?

I think that can at best be only guesstimated how much of a reduction there will be. People who live near the Delaware border are just as likely to continue buying their booze over there while shopping for other things in the "Land of Tax-Free Shopping".

The Commonwealth Foundation was harping about PLCB employees who were fired for widespread financial irregularities. I recall that at least one PLCB AGENT who inspected bars was recently busted for being on the take.

And that raises an interesting issue of it's own. To my knowledge, this legislation would not dismantle the entire PLCB. There would still be the inspecting/policing function in place. They still have bars and beer distributors to attend to. And wouldn't it seem logical that they would set up an inspection/enforcement program on the private liquor stores? So that would entail having to hire a lot of new inspectors along with the attendant costs of that.

No, there are a lot of complexities involved in this scheme that remain to be addressed.
Currently, the pitch is being made for all it is worth, so we're being flown right on by all those little details.

I don't know that privatizing is not the best way to go on it's own merits. What I do have a problem with is that the driving impetus is that $4 billion gap that has to be plugged by any means necessary (except raising taxes). And $2 billion dollars in easy money looks mighty tempting to these jokers. (Similar to the Fast Eddie scheme to lease off the Turnpike along with exacting highway robbery on travelers on Federally constructed and funded I-80) Just seems the people in this country, no matter how severe the lessons have been, can never seem to learn where chasing after the easy money lands us. (I'm still getting flyers in with my bank statements from my VERY conservative small local bank pitching me to tap into the "Borrowing POWER" I have in my home equity) Puzzled

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With regard to retail banks, what I see is the progressive dimunition/dilution of strict controls that were put on banks during the Depression, a Depression I might add, that formed in a free market since there were few regulations on either banks or industry prior to the Depression.

Banking regulations were instituted to restrain the natural tendency of businesses in a free market to gravitate toward oligopoly and if possible monopoly i.e., concentration of power and control. This is achieved through merger, acquisition, and destruction of competition through various other underhanded methods, all of which have occurred historically over and over and again and again until stopped through force of regulations and laws preventing it.

The dimunition of banking regulations started small as it alway does with the allowance of 'branch banking' and progressed to banking across state lines resulting in national institutions like the Bank of America, a far different animal than the hallowed creation of Giannini (a gold standard of prudent banking practices). Left unabetted, the unbridled greed and avarice of such a mammoth institution brings about it's own self-destruction before it can achieve the ultimate goal- to be The ONLY Bank IN America. But of course, they were abetted by the government and propped up.

What fascinates me most is the 'remedy' put in place by the FDIC when a bank fails - merge the remainder of it's assets with another institution thus creating an even greater concentration of power. Why not just liquidate the failed bank and move on to the next one? After all, a bank really consists of nothing but a scheme. It's tangible assets are few- real estate and office equipment. Auction off the bank branches. Successful bidders can rip out the vault, block off the drive-in window and put in something productive like a Subway, a Starbucks, or a hot dog stand.

The only real cost is social whereby you wind up with office loads of unemployed workers who are hard to employ. The timing is good in Pennsylvania since they can move over to these 'deregulated' electricity schemes/scams whereby companies that produce nothing, 'market' kilowatts that are produced and transmitted by others. Should be a good fit.

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Well, if you want my views, Click Here and read my posts on that thread, as well As Here.

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Well, if you get two billion up front and privatization otherwise breaks even year-in and year-out, it's worth it in my view.

What bugs me in regards to how urgent they see this immediate two billion is that they are just going to use it to out a finger in the dyke of massive pension shortfalls.

Government never seems to be able to think more than a year ahead in regards to its fiscal problems. The entire state pension system needs to be revamped, but just like Reed and his cronies would not touch township salaries, those in the General Assembly don't want to touch the pension problem - and it is a ticking time bomb.

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Polieia, so your argument is if there was less regulation these problems would not have existed?  We tried that.  It was called the 19th Century when corporations looted natural resources, oppressed workers and formed monopolies.  You didn't have regulatory capture then, of course, you had government capture.   I don't think I want a return to having people falling into meat vats and companies selling it as sausage.  They don't call these ideas zombie economics for nothing.

Actually, it turns out that Virginia's effort to privatize liquour is floundering in part because the estimates of revenue were wildly optemistic.  A Corbett proposal may only net $860 million if that

Again, previous proposals to deregulate did nothing to address local concerns and we need that now.  Carla has enough on her plate and I don't think she needs to also watch who is going to get the license to the Narberth Wine Shoppe.

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Of course we had regulatory capture back then. Read my two links above closely - all my comments. Here They Are Again.

The first true Big Business in this country (outside of government - which is the most dangerous monopoly) was the rail system and the government may as well have owned it. The first industrialists and bankers - JP Morgan, Rockefeller, etc. were in bed with the government.

The private Federal Reserve banking system was concocted in a secret meeting between those industrialists and bankers (known as the "money trust" back then) and the U.S. government at the turn of the century.

If you keep the corporations out of bed with government - and especially banks, and you don't have fractional reserve banking and the Fed, then you have true, natural competition that benefits all.

If you look at any business that has achieved near monopoly status it is generally due to regulation. They are in bed with the government and they get the government to write regulations that benefit them and hinder their competition.

Wall Street, banks, health care, military contactors, you name it. They all benefit from government regulation to the detriment of the free market and the People.

That’s why I cringe when I hear government agents and their supporters saying “we just need more regulation”.

There are good and necessary regulations, but when it comes to Big Business being in bed with government, those regulations will almost certainly benefit Big Business and harm the People due to regulatory capture.

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Politeia, we must be from two different alternative universes.  In mine, the modern regualatory state came about because of monopolies created by an unrestrained free market--trusts owned by people like Morgan, Rockeller and Carnegie.  These obtained vast power and influence, stifled markets and corrupted politics.  They were in bed with government because they OWNED it.  Only when the people through the government took it on was that power restrained.  Sure, corporations will use their power to manuever regulations to their advantage, but that is an argument for breaking that influence not for further unleashing it.

Even in your universe, I am sure you can agree that any power needs to be checked.  The founding generation certainly understood this which is why they made checks and balances.  Having no check just means those with the power can wield it at will.  The last good proponent of leaving power unchecked was Neville Chamberlain and we all know how well that turned out.

Getting back to the point at hand, we need checks to make sure the licenses are not given out to entities or people who would do harm to our communities.

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Getting back to the point at hand, we need checks to make sure the licenses are not given out to entities or people who would do harm to our communities.

This is a good form of regulation. It allows for a free market, but makes sure reputable people sell liquor.

We agree, then, that corporate interests owned government when they first came about in the late 19th century.

Where we seem to disagree is that I believe many corporate interests still own government, and you somehow think they don't.

Corporate power where there is consumer demand and no supportive government regulations to give corporations an advantage over competitors (like we have with Wall Street, banks, health care, etc. today) is most certainly not a bad thing. It is good for the economy and it drives prices down. I don't see the lesser regulated corporate giants like BMW, Oracle, Cisco, Sony, Microsoft or Google as being bad. They provide excellent and ever improving products/services and at ever lower costs to consumers to keep their competitors at bay (the free market way). It's when corporations use the government to hinder their competitors through regulation that prices go up because those corporations who are in bed with government have hindered their competition through regulation.

Not realizing that indicates to me you live an alternative universe Eye-wink

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Hat ? Evil ? Grade

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Corporate power where there is consumer demand and no supportive government regulations to give corporations an advantage over competitors (like we have with Wall Street, banks, health care, etc. today) is most certainly not a bad thing. It is good for the economy and it drives prices down.

 

I think this is what Bubba means when saying you come from another universe - given what has happened since October 2007 I think it is a hard sell that Wall Street and the banking industry are, "certainly not a bad thing" and that they have been "good for the economy".  But, it would be true to say that Wall Street and the banks sure did drive down prices(locally, nationally, internationally) in 2008, 2009 into 2010! Eye-wink  Our healthcare system is giant mess and has been that way for a long time and people who don't have insurance to pay for it up to those who pay exorbitant premiums all agree on this.

 

I would think Bubba is right in thinking your from another universe in thinking this...but you could have amnesia...it is quite common these days.

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I don't think you read the post correctly.

I'm saying heavily regulated Wall Street, banks, health care, etc. are BAD for the economy because they are in bed with government and this drives prices up due to regulatory capture where they get regulations from the government that harms competition and that allows them to do reckless things.

I stated lesser regulated corporate giants like BMW, Oracle, Cisco, Sony, Microsoft or Google are good for the economy. They provide excellent and ever improving products/services and at ever lower costs to consumers to keep their competitors at bay - the free market way.

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You don't think BMW or Microsoft or Google are regulated?  Let me introduce you to a little something called the Sherman anti-trust act not to mention EPA (emissions standards), FCC (net neutrality), etc.

I read your post correctly, it just doesn't make sense.  If corporations are this bad because they are regulated, imagine how bad they will be if they are not.  To apply your reasoning another way, it is like saying we shouldn't have the Fourth Amendment because the police have "search and siezure capture".

But we digress.

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I never said they were not regulated. I said "lesser regulated", and the point was that they have not achieved regulatory capture via buying off Congress like Wall Street, banks, the medical industrial complex, the military industrial complex, Big Oil, Big Agra, etc. have.

No doubt all large corporations like to have good relationships with the government, but those who specifically use government to get a leg up and harm their competition have my ire - as do those in government who are bought and paid for, which is basically everybody in Congress except a small handful.

And yes, there are good regulations out there. Safety regulations for BMW and their cars, etc. However, when there is no government regulation that benefits one company over another, then there is true competition, more jobs are created, products are less expensive and of a higher quality due to free market competition - I.e. capitalism.

Or would you rather have the government make cars, computers, etc? They already run the banks and health care, and look where that has gotten us.

Again, please read my posts, Bubba. I always have to explain the same points to you again and again. I never said BMW et. al. were not regulated.

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