Callaghan: Liquor initiative wasn't crafted to lower booze prices

By Peter Callaghan, Columbian Syndicated Columnist

Published:

 

Thanks to Washington's liberal initiative laws, voters here get to be just like politicians, for better and for worse. Better because it is empowering to decide what passes and what fails. Worse because, just like legislators, voters might have to compromise to get something passed.

That's what happened with Initiative 1183, which shifts Washington from a so-called liquor-control state to private distribution and sales. Except the initiative that kicked in June 1 isn't an example of pure free enterprise and probably won't lead to lower prices. The reason? Compromises. And these compromises weren't crafted by those sneaky legislators in Olympia; they were crafted by the corporate sponsors and their consultants, then approved by voters.

I-1183, adopted in 2011, is the offspring of I-1100, defeated in 2010. Consultants advised that if liquor privatization were to pass on its second try, it had to be changed to disarm opponents. In 2010, I-1100 opponents succeeded by exploiting the specter of minimart liquor sales and by warning that reducing state profits would reduce support for government programs, especially public safety.

So, the second Costco-drafted and -funded measure said stores had to be at least 10,000 square feet to sell liquor. I-1183 also imposed new fees to replace the profits collected by the state. Backers even lined up their own firefighters and pretend firefighters to combat the opponents' firefighters and pretend firefighters.

The measure was compromised to attract more votes. The changes were so broad they risked chasing away core supporters -- those who either believe in privatization on principle or who assumed it would produce cheaper booze. So proponents didn't talk much about price, relying instead on buzz phrases such as free enterprise and competition in hopes voters would assume that meant cheaper spirits. Opponents were so intent on trying to reanimate the dead issues of corner liquor stores and cuts to public safety that they didn't run with the fact that the new initiative might have no effect on Washington's notoriously high prices.

The state Office of Financial Management did an analysis suggesting prices might actually increase because of the fees imposed by I-1183 and the fact that private sellers want a profit, too. It turns out private sellers in California have higher average markups than the markups imposed by the state under our old system. Prices in Washington were higher not because of inefficiencies of the state monopoly but because our lawmakers placed much higher taxes on booze than their California counterparts. All of those taxes stay in place under I-1183.

Easy, expensive victory

The OFM study was buried in the small print of the voters pamphlet. News articles detailing the math were dismissed as evidence of anti-I-1183 bias. The campaign strategy worked. Backers had an easy, though expensive, victory.

Now they have to deal with the inevitable anger of many voters who thought they were voting for lower prices. Some consumers are looking for someone to blame, and it won't be themselves.

Corporate backers must now re-engage their spin machines, tossing out various excuses for high prices such as that the private sellers are installing higher markups either because they can or because they are trying to recover startup costs quickly. Some are even blaming the state for passing rules that follow the initiative's dictates.

When all else fails, they assure us that markups and prices will come down as the new system settles out and competition is sparked.

Maybe. But it might just be that the initiative was crafted to win the election and to transfer profits from the state to private sellers -- not to lower prices for consumers.