September 14, 2005

The Wal-Mart Bugaboo

Sen. Glenn Grothman was swept into office because his opponent State Senate Majority Leader Mary Panzer was ineffective in advancing the government-limiting Taxpayers' Bill of Rights (TABOR). We've found nothing has been done with TABOR. It's dead thanks to the new GOP Senate Leader Dale Schultz, a TABOR opponent. Now, Grothman is explaining why in a committee he voted to keep the minimum markup law. On WTMJ radio he put out two reasons: 1) he didn't get his compromise amendment voted on; and 2) he fears Wal-Mart swooping into the gas market, killing off competition, then raising prices. Grothman's first reason is just petty legislator-speak. The second reason has little empirical evidence. I've studied economics for years and know the theory of predatory pricing. The problem is there are few examples of it actually happening. For instance, Wal-Mart has cut prices on food and consumer disposable goods that have driven out mom-and-pop stores selling the same items. It doesn't matter if the state has a minimum markup law or not. There's been no example of Wal-Mart then raising prices after killing competition. That's because there's free entry into the market. A big competitor can come in like Target. Smaller stores adjust to the new competition and offer better service, a better environment, or lower prices on some items. New business models like the dollar stores pop up. Minimum markup backers have not offered any reason why something similar wouldn't happen in the gas market.

Grothman was a breath of fresh air when he came into office. He's now become a big disappointment in a very disappointing Wisconsin Republican Party.