PA governor vetoes privatized liquor sales, says it would raise prices and reduce selection

If you live in a state where beer, wine and liquor are sold normally though private vendors, Pennsylvania might look like a foreign country to you. In the Keystone State, if you want a case of beer or some hard stuff, you need to go to a state owned and operated liquor store run under the control of the Pennsylvania Liquor Control Board. (PLCB) The state sets the prices, decides which brands to carry and how much you can buy at any one time. This is a dreadfully inefficient system at best and there’s been a movement going for some time to do away with the PLCB and open up the trade to free market competition. The state legislature recently moved to do just that, but when the measure reached the desk of Democrat Governor Tom Wolf he vetoed it.

Why? Because he said it would lead to “higher prices and less selection” for consumers.”

Regarding House Bill 466: “This legislation falls short of a responsible means to reform our state liquor system and to maximize revenues to benefit our citizen,” Governor Wolf said. “It makes bad business sense for the Commonwealth and consumers to sell off an asset, especially before maximizing its value. During consideration of this legislation, it became abundantly clear that this plan would result in higher prices for consumers. In the most recent case of another state that pursued the outright privatization of liquor sales, consumers saw higher prices and less selection.”

That most recent case the governor mentions is Washington. And they did see prices go up when they privatized, but Wolf fails to mention that it’s because they passed a huge new alcohol tax at the same time. Funny how that works, eh?

About now you might be thinking that increasing competition tends to actually reduce prices and increase selection tailored to what the market demands and the governor is somewhat off his rocker. You would not only be correct, but also you’d be echoing the precise sentiments expressed by Jonathan Adler at the Volokh Conspiracy. But he’s not convinced that Wolf is simply ignorant of basic economics. Instead, there might be some other motivations in play.

There are plenty of other reasons why Governor Wolf might have wanted to veto liquor store privatization. One would be the loss of state jobs to the private sector. Another might the opposition from beer wholesalers who worried about an increase in competition. In other words, signing the bill might have crossed powerful constituencies that benefit from the status quo — even if they benefit at the expense of consumers. It’s also possible that the governor feared that privatizing liquor sales would make alcohol taxes more transparent, thus limiting a potential source of state revenue, or that he feared (as union opponents of privatization argued) that privatization would increase alcohol abuse and alcohol-related accidents — but that argument was premised on privatization making alcohol less expensive and more readily available. Oops.

If Governor Wolf believes the explanation he offered for vetoing the liquor store privatization law, he does not understand basic economics and is immune to empirical evidence. More likely, then, he had other reasons for the veto — reasons he’d rather not share publicly.

I suppose this remains in the realm of “speculation” for the time being, but it’s difficult to imagine that even Wolf believes the line he’s trying to sell here. Far more likely, as Adler suggests, is the fact that the Governor is interested in hanging on to his office and, were he to dump the PLCB, he would be angering the public workers unions as well as some powerful, well connected donors who don’t want to see privatization disrupting the very comfortable situation they’ve been enjoying under the current system. It’s a blatant sell-out which consumers in the state shouldn’t have to tolerate.

The real world effects are easy to measure without needing a magic 8-ball. Adler points us to an article at Reason where an actual consumer compares the prices in Pennsylvania to those just across the border in New Jersey at a popular, privately run liquor store. The prices for a 750 ml bottle of various high end products are compared and it’s not a tiny difference being discussed. Prices in New Jersey ranged from five to twelve dollars lower for the exact same bottle of hooch. Even more shocking to me was the fact that the Jersey outlet offered 354 different brands of scotch while the PLCB outlet offered less than 100. In what universe is sticking with the liquor control board a good move for consumers?

It’s cronyism and political corruption, as is far too often the case. The only question now is whether or not the voters in Pennsylvania will be made sufficiently aware of this and hold Wolf accountable at the next election.

EDIT: (Jazz) The original article mentioned beer sales which are apparently now not handled through the PLCB outlets. The text regarding beer is struck through.