It seems there is almost no limit to what the government will involve itself in. In almost every facet of our lives, we can find government coming at us in one form or another.
Right now, there is legislation proposed in Florida that would prohibit craft brewers from selling their own beer.
I’m serious.
They would first have to directly sell their bottled and canned beer to a distributor. If the craft brewers wanted to sell their own beer, they would then have to buy it back from the distributor at a considerable markup.
It is all being proposed in the name of competition. Of course, as with most government laws, the actual results will be the exact opposite of the stated intentions.
In this particular case, the law is being pushed by large beer distributors in order to prevent competition (even if their reasoning dishonestly states the opposite).
A craft brewery is by nature small and independent. While still a small market share, sales of craft beer have been increasing recently, while overall beer sales actually decreased slightly in 2013.
What would be the results of such legislation? We can’t be certain how consumers would react, but it would generally be bad for everyone except the large beer distributors who are trying to keep away competition from the little guy.
Prices for craft beer would go up. Consumers will pay more, while likely having fewer options available. Some small breweries rely on their direct sales of craft beer for profitability. If this new legislation goes into effect, then some small breweries might choose to shut down if consumers won’t pay the significantly higher prices.
This is just a story of politicians using the force of government to do the bidding of the lobbyists. It has nothing to do with consumer safety. It has nothing to do with boosting competition. And it has everything to do with using government power against the little guy.
The Tesla Factor
This story reminds me of what’s happening with Tesla Motors (NASDAQ: TSLA).
The states of New Jersey, Texas, and Arizona are all preventing Tesla Motors from selling cars directly to consumers. The cars will have to be sold through a dealership.
Again, the politicians and lobbyists defending such legislation will say it is for competition or consumer safety or to protect the consumer from getting ripped off. Of course, the truth will be the exact opposite. This will be nothing but a rip-off to consumers who will have to pay a significant mark-up for a new car.
Some conservatives may defend the legislation that has specifically targeted Tesla, particularly if they don’t like the company because it received federal subsidies for its “green” cars. (As if GM and Chrysler haven’t received subsidies? Incidentally, Tesla is the only one that’s actually paid the government back.)
I do not like Tesla Motors for this reason either. The company should be selling cars on its own merits, not taking taxpayer-funded subsidies to sell cars that use less energy. The consumer can make this choice for himself.
At the same time, I don’t think two wrongs make a right. Just because Tesla gets to sell its cars with government subsidies doesn’t mean New Jersey and other states should be enacting legislation that harms the consumer. It doesn’t mean putting up more red tape. It doesn’t mean innovation should be stopped to punish one company.
After all, many consumers would find it preferable if they didn’t have to walk into a dealership to buy a car. Why isn’t it an option to just go on the Internet, pick your selection of colors and upgrades, and buy the car?
If that’s what some consumers want, companies should be able to do business that way. Having the government require dealerships is not only anti-competitive, but it is also costly to consumers who don’t necessarily want to visit a dealership.
A Common GOP Theme
What do New Jersey, Texas, and Arizona all have in common? Besides wanting to ban direct selling from Tesla, they all have Republican governors.
In Florida, where they are trying to ban craft breweries from directly selling their beer, the legislature is dominated by Republicans.
Don’t get me wrong here — I am not trying to blame Republicans for everything. I only point this out because the Democrats get so heavily criticized for being against the free market, while I don’t see the same thing for Republicans.
In terms of constituents, it is probably true that Republicans tend to be more free market-oriented than Democrats. But it seems that once someone gets into power — whether at the local level, the state level, or the federal level — most principles go out the window.
Ronald Reagan said, “No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we’ll ever see on this earth.”
Ironically, this held true even during eight years of Reagan’s presidency. Despite his great words about the free market, government programs and government spending continued to grow. It just shows how very difficult it is to shrink government, even when there is a tendency of the general public to distrust politicians.
Lessons to be Learned
As long as there are politicians with power to use, they are going to try to use it. And they are not going to stop voluntarily.
If states are passing bills preventing entrepreneurship in making and selling beer, how can we ever hope to change Washington, D.C.?
The only way things will change in the capital is when they run out of money. When the politicians can’t tax and borrow anymore and have to start breaking their promises of handing out goodies to the citizenry, then we may finally see a reduction in government power.
The only other possible way for power to be reduced is for American citizens to demand it. But this has to be widespread, and it has to be firm.
It isn’t enough for someone to just say he doesn’t like politicians. It isn’t enough for someone to just say he wants less government. It has to be a principled and consistent stand.
You can’t just condemn somebody else’s government handout. You have to be willing to condemn your own.
Your Money and Politics
We should never believe politicians are on our side. If they are willing to harm consumers by passing legislation written by lobbyists, then they are not looking out for you. And if they are harming you in one area, then you can be pretty sure they are not trying to help you in another area, except only to get your support and vote.
This is why you should never trust a government program, even if it seems it’s there to help you financially.
You should be careful of taking student loans to go to college. The government will change the rules in an instant. They will up your interest rate. They will not let you get away without paying.
And you should run from retirement schemes such as the new MyRA introduced by Obama. This is nothing more than a way for the government to get you to fund its deficit spending.
You should also really be cautious of any type of government welfare. I am not saying you should not take it — after all, you are probably paying more in taxes than what you get anyway. But you should never become dependent on it.
You should never become dependent on the government for anything in your life.
If you follow that piece of financial advice, you are probably already ahead of at least 80% of the population.
Until next time,
Geoffrey Pike for Wealth Daily
