Even A Blind Squirrel

Defying all the odds, voter expectations, and a long sad history—the New Mexico state legislature did something intelligent!

No, I’m not talking about the recent legislation to legalize recreational marijuana—this state will legalize damn near anything they can slap a tax on.    We’re taxing gambling and drugs, if we ever cure AIDS, taxing prostitution won’t be far behind.

The state legislature miraculously ended the long-standing cartel on liquor licenses.  For reasons that only a bureaucrat would understand, the state decided years ago that the total number of liquor licenses in the state would be limited to one for every two thousand residents.  Since the population of New Mexico is fairly stable—due to a lack of jobs—the number of liquor licenses has been fairly stable (currently set at 1,411 licenses).

If you limit the number of licenses, thus prohibiting competition, you have created a cartel.  And regardless of the product being sold, cartels mean an increase in price above the competition level, and a dramatic rise in the cost of purchasing one of those few available licenses.  Cartels, of course, are illegal under the federal anti-trust laws, unless the cartel is set up by the government (like Major League Baseball, gambling licenses, state run liquor stores, and in New Mexico—a license to sell alcohol by the drink).

Surprisingly, government-created cartels are more common than you think.  Businesses “lobby” elected officials to set up strict or limited licenses for the “good” of the consumer.  This is why cities have limited number of cab licenses or a state limits the number of permits to be in the home moving business.  After all, it’s not like just anyone can get a truck and hire a couple of guys to pick up boxes—you need professionals to lose your stuff!

The price of those New Mexico liquor licenses fluctuated, but frequently approached the $1,000,000 mark.  Two recently sold for $975,000 each, but remember—the purchaser is buying the license not from the state, but from a previous owner.  So, if a new bowling alley or large chain restaurant wanted to build in the state, they had the choice of either waiting until an existing restaurant went out of business and sold its license or give up the idea of building in New Mexico and just go build in Arizona.  Guess which one happened most frequently.

Everyone knew this was wrong and everyone knew that the reason you had to pay $10 for a poorly made martini was that you were helping the restaurant owner pay for that expensive license, but year after year, nothing happened.  Thi$ wa$ partly becau$e the bu$ine$$e$ holding tho$e licen$e$ were very $ucce$$sful at “lobbying” politician$ not to correct an obvious$ problem.  No one know$ how they did that.

The argument has been that it wouldn't be fair to issue more licenses, since the currently operating bars and restaurants had paid over half a million bucks for theirs.  Notice lately how the word “fair” can mean just about anything?  Those people who already own licenses didn’t pay the state or the taxpayers for those licenses:  they bought them from speculators and businesses who had invested in those limited licenses.  Investment firms in Chicago evidently speculated and bought up lots of those licenses so they could “lease” them to the highest bidder—a bidder who was absolutely not a local pub within walking distance of my house.  

Nothing makes a $10 martini taste better than knowing that about half the price goes to some out-of-state investor who’s profiting from my state’s ignorance.

Imagine the gall of a few restaurants, tearfully pleading for the right to continue their monopoly, limiting consumer choice while overcharging for a product, just because of the expense of their setting up their cartel.  It is kind of like a mugger demanding a surcharge for the bullets in his gun.  Or the Sinaloa drug cartel protesting the legalization of cannabis because it ruins its business plan.

“Wait,” you say, “Doesn’t New Mexico have an incredible drunk driving problem?  Wouldn’t allowing more bars to open just make this worse?”

No, because the state has limited liquor licenses for years and it obviously hasn’t solved the problem.  Limiting the number of bars available doesn’t reduce the desire to drink—it just forces people to either buy liquor by the bottle, or to drive farther to a bar.  And while it is extremely politically incorrect to say this, a disproportionate number of DUI-related incidents happen in a limited number of historically economically deprived areas.  If those areas are not included in the state averages, New Mexico drops down in the rankings to the level of one of those Midwest flyover states with too many vowels in its name.  

Let me put that another way.  Providing more good jobs in Grants will lower the DUI rate a lot more than preventing the opening of a new steakhouse in Albuquerque.

However unlikely it was, the state legislature acted correctly.  The time to fix a past wrong is always now.  There is no need to limit economic opportunity to a select few wealthy individuals.  The new legislation places the price of a liquor license low enough to encourage opportunity but still high enough that the holder would not willingly risk behavior that invite the state’s canceling the license.  This was smart and well done.

I commend the state legislature for doing the right thing.  Now, I’m going to go look in the backyard and check for unicorns.