The roster of those testifying at the Pennsylvania Senate Law and Justice Committee hearing on liquor privatization seemed intended to generate ill will toward privatization because of perceived negative “social impacts.” They inevitably tugged at heartstrings and asserted that selling off our Soviet-style liquor system will bring nothing but ruination, despite a plethora of data saying otherwise. Even as lawmakers must examine all the facts surrounding privatization, we must also rethink how we define a “social impact.”
First, we must refute the claims made by organizations opposed to privatization on the grounds of what they perceive as a “negative social impact.”
According to the U.S. Department of Health and Human Services, 29 percent of those ages 12-20 consumed alcohol in Pennsylvania. Compare this to states that have light government control, such as West Virginia, and the number decreases to 24 percent. In fact, the United States average is 27 percent. If government-controlled liquor is effective in curbing underage drinking, why are we 2 percentage points higher than the national average and higher than almost all our neighboring states?
They also tell you that privatization will result in more drunken driving and cause more alcohol-related accidents and fatalities. In fact, the opposite seems to be true.
Pennsylvania once again is worse than that national average in two of these three categories. In alcohol-related traffic fatalities in 2010, Pennsylvania was at 33 percent with the national average being 31 percent.
Furthermore, MADD ranks the states in order of DUI-related accidents per capita. Pennsylvania ranked 35th best — lower than New York, New Jersey, New Hampshire, West Virginia, Virginia, and Ohio. In overall alcohol-related deaths, Pennsylvania also surpasses neighboring states.
But what about the unspoken positive social impacts of privatizing our state liquor monopoly?
As President Ronald Reagan used to say, “The best social program is a job.” The labor unions will tell you that this plan kills jobs but they are wrong. More than doubling the number of outlets for wine and spirits can only mean more jobs. Is organized labor saying they don’t believe their members are employable in the private sector? The ability for these employees to use their previous knowledge to specialize in this new industry could actually increase their earning power.
What about the social impact of increased revenue for essential government programs?
A 2010 study commissioned by the Wine and Spirits Wholesalers of America found that 23.6 percent of the wine purchased by consumers in Pennsylvania comes from out of state, resulting in the loss of $17.3 million in excise taxes. A more recent study conducted for the PLCB showed that 45 percent of residents in Philadelphia and its surrounding counties purchase some or all of their alcohol outside Pennsylvania. The PLCB’s own numbers showed that consumers purchased approximately a quarter of their wine and spirits in other states.
This border bleed equals more than $180 million in lost sales and more than $40 million in lost state tax revenue annually from just a handful of counties.
What about the social impact of divesting the conflicting interests of PLCB sales and enforcement?
Our current system is a house divided. The same entity charged with licensing vendors and enforcing liquor laws is marketing, selling and producing alcohol. Under the governor’s proposal, penalties and fines become much stricter as the PLCB’s conflicted mission would be resolved. In the new, fully privatized system, the PLCB would license, enforce and educate — which is the appropriate role of government.
Distributing and selling liquor should not be in the hands of a state-run monopoly. This is clearly not a core function of government. The lack of reform in the face of overwhelming public support leads citizens to conclude that state government is distant, unresponsive to their wishes and captive to selfish interests.
David N. Taylor, a Susquehanna Valley Center for Public Policy board member, is executive director of the Pennsylvania Manufacturers’ Association, where Carl A. Marrara is director of government affairs.