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Jewish World Review Jan. 19, 2006 / 19 Teves 5766

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Consumer Reports

Shoplifting as governance


http://www.NewsAndOpinion.com | In 1786 the Annapolis Convention, requested by Virginia and attended by only four other states, called for a second gathering to revise the Articles of Confederation in order to strengthen the federal government. Some revision: The second meeting became the Constitutional Convention. It scrapped the Articles, partly because the Founders were alarmed by states legislating relief of debtors at the expense of creditors, often in ways not easily distinguished from theft.


Something not easily distinguished from theft recently occurred in Annapolis. In legislation ostensibly concerned with any company that has 10,000 employees but pertaining only to one, Maryland has said Wal-Mart must spend 8 percent of its payroll on health care or must give the difference to the state.


The Constitution's foremost framer, James Madison, understood the perils of democracy at the state rather than the national level of an "extensive republic": State legislatures have fewer factions competing for favors than compete for Congress's favors. States, being smaller than the nation, have legislatures more easily captured by overbearing majorities. Madison would have understood what Maryland has done.


Organized labor, having mightily tried and miserably failed to unionize even one of Wal-Mart's 3,250 American stores, has turned to organizing state legislators. Maryland was a natural place to begin because it has lopsided Democratic majorities in both houses of its legislature.


Labor's allies include the "progressives" who have made Wal-Mart the left's devil du jour. Wal-Mart's supposed sin is this: One way it holds down prices (when it enters a market, retail prices decline 5 to 8 percent; nationally, it saves consumers $16 billion a year) is by not being a welfare state. That is, by not offering higher wages and benefits than the labor market requires. Labor's other allies are Wal-Mart's unionized competitors, such as, in Maryland, Giant Food, a grocery chain. These allies are engaging in what economists call rent-seeking — using government to impose disadvantages on competitors with whom they are competing and losing.


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Wal-Mart's enemies say Maryland is justified in expropriating some of the company's revenue because the company's pay and medical benefits are insufficient to prevent some employees from being eligible for Medicaid. Well.


Eighty-six percent of Wal-Mart employees have health insurance, more than half through the company, which offers 18 plans, one with $11 monthly premiums and another with $3 co-payments. Wal-Mart employees are only slightly more likely to collect Medicaid than the average among the nation's large retailers, which hire many entry-level and part-time workers. In the past 12 months, Wal-Mart, the largest private employer in the nation and in 25 states, estimates that it has paid its 1.3 million employees $4.7 billion in benefits. That sum is almost half as large as the company's profits, which last fiscal year were $10.3 billion — just 3.6 percent — on revenue of $285 billion. Wal-Mart earns just $6,000 per employee, one-third below the national average. Anyway, Wal-Mart's pay and benefits are sufficient to attract hordes of job applicants whenever it opens a new American store, which it does once every three days.


Maryland's new law is, The Post says, "a legislative mugging masquerading as an act of benevolent social engineering." And the mugging of profitable businesses may be just beginning. The threshold of 10,000 employees can be lowered by knocking off a zero. Then two. The 8 percent requirement can be raised. It might be raised in Maryland if, as is possible, Wal-Mart's current policies almost reach it.


This is part of the tawdry drama of state politics as governments grasp for novel sources of money. Forty-eight states are to varying degrees dependent on revenue from gambling. Forty-six states are addicted to their cut, to be paid out over decades, from the $246 billion coerced from the tobacco industry by using the specious argument that smoking costs their governments huge sums. As a result, 46 states have a stake in the long-term profitability of tobacco companies.


Maryland's grasping for Wal-Mart's revenue opens a new chapter in the degeneracy of state governments that are eager to spend more money than they have the nerve to collect straightforwardly in taxes. Fortunately, as labor unions and allied rent-seekers in 30 or so other states contemplate mimicking Maryland, Wal-Mart can contemplate an advantage of federalism.


States engage in "entrepreneurial federalism," competing to be especially attractive to businesses. A Wal-Mart distribution center, creating at least 800 jobs, that has been planned for Maryland could be located instead in more hospitable Delaware.


Meanwhile, people who are disgusted — and properly so — about corruption inside the Beltway should ask themselves this: Is it really worse than the kind of rent-seeking, and theft tarted up as compassion, just witnessed 20 miles east of the Beltway, in Annapolis?

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