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Press Release

    On the Fritz

    03/12/2002

    Few Senators or members of Congress are more pleased that no commercial activity or human action is outside the sphere of government control than Senator Ernest “Fritz” Hollings (D-S.C.). As Chairman of both the Senate Energy and Commerce Committee and the Senate Appropriations Subcommittee on Commerce, Justice, State, the Judiciary and Related Agencies, Sen. Hollings holds unrivaled power over American industry. Enjoying the perch from which he operates, Hollings fiercely opposes any action that would take authority away from government or do anything to undermine his considerable influence.

    Never afraid to speak his mind, or act in a discourteous fashion, Sen. Hollings recently berated Federal Communications Commission (FCC) Chairman Michael Powell for “believing in the market.” In testimony before Hollings’ subcommittee, Powell said, “I think the law recognizes market interests. The public interests and market forces can [be the same].” Hollings took this rather unenthusiastic endorsement of the market to task by saying that Powell might be better suited to be “an executive vice president of the U.S. Chamber of Commerce” than chairman of a regulatory body.

    Chairman Powell thrust himself into Sen. Hollings’ crosshairs by taking steps to put consumers in charge of the future of key industries rather than Sen. Hollings. First, Powell’s FCC eliminated the ban on broadcast dual ownership by permitting Viacom to own both CBS and UPN. Powell then allowed News Corporation to purchase 10 Kris-Kraft local television affiliates, which required a waiver of three separate FCC cross-ownership regulations. Now Powell is taking action to relieve regional phone companies of regulations that prevent them from deploying broadband services.

    All of these actions would reduce the influence of Washington and grant consumers more power over the future of media and telecommunications by forcing businesses to compete for customers rather than the blessing of Sen. Hollings. This is sound policy for those who believe that the government has far too much influence over our lives and that business invests too much time and money in Washington instead of innovation and consumer satisfaction. But this presents an unabashed threat to the source of Sen. Hollings’ power and influence.

    Private Interests

    Sen. Hollings says that Powell’s actions disregard “the public interest,” but rarely explains exactly what this means. In a diverse society with numerous competing economic and cultural factions, it seems insincere – or at least naïve – to think that one policy course is in “the public interest” while another is not. This point was most famously made in 1962 by economists James Buchanan and Gordon Tullock in their manifesto, The Calculus of Consent. Buchanan and Tullock argued that there is, in fact, no public interest, only competing private interests that wish to use the power of collective choices, made by political institutions, to further their own agendas.

    Of course, such talk de-legitimizes government intervention, because it acknowledges the inefficiencies of government action, which benefits some citizens at the expense of others. But this was precisely their point: “Almost any conceivable collective action will provide more benefits to some citizens than to others.” If businesses could curry the favor of powerful government officials like Sen. Hollings to improve their own position and disadvantage rivals, the rough and tumble world of consumer sovereignty could be eased.

    Government decisions differ greatly from those of the market, which are based on voluntary trades where each side derives benefit. Government decisions are coercive and binding with no chance to “walk away” from an unfriendly outcome. But if there were no talk of “the public interest” and all economic decisions were left to voluntary exchange in a free market governed by contracts, torts, and property rights, Sen. Hollings would be robbed of the power he has accumulated since first being elected to the Senate in 1966. In this way, “the public interest” bears an uncanny resemblance to what’s in the interest of Sen. Hollings.

    Fritz on the Issues

    It should be no surprise that on issue after issue, “the public interest” seems to mean greater government intervention. In telecommunications, Sen. Hollings disdains the deregulation passed by the House and would prefer to dismember the regional phone companies, add a new layer of regulation, and create a permanent government-controlled monopoly. On this issue “the public interest” happens to correspond to the private interests of Hollings’ long-time allies: AT&T, WorldCom, Sprint, and many smaller competitors who would benefit greatly from his legislation.

    On the issue of copyright law, Sen. Hollings favors a bill to require nearly all digital electronic devices from PCs, to DVDs, to digital cameras to contain a lock to restrict the copying of music or movies. This intervention would create a government technology standard and punish consumers who tamper with recording locks, or purchase unauthorized equipment, with criminal penalties. Some in the entertainment industry, who view Internet piracy and CD “burning” as the biggest threat to their profits, agree wholeheartedly with Sen. Hollings that this gross restriction on innovation and consumer freedom is in “the public interest.”

    When it comes to passenger rail service, Hollings believes that Amtrak’s record $1.2 billion deficit in 2001 should be rewarded with $22 billion in cash. In particular, Hollings wants taxpayers to keep the New York to New Orleans route – which runs through Greenville, South Carolina and loses an average of $124 per passenger – alive with $580 million a year.

    This new taxpayer bailout would come at a time when Peter Pan Bus Lines, Railway Service Corporation, Guilford Rail System, and British train operators Great Western Trains, Stagecoach, Virgin Management Group and GB Rail have all expressed interest in purchasing parts of the Amtrak system. But how could private businesses be trusted to act in “the public interest,” which surely includes unprofitable daily trips through Greenville, South Carolina?

    Sen. Hollings also believes that it is in “the public interest” to restrict the cars and trucks that consumers may purchase. Joining with Commerce Committee members John Kerry (D-Mass.) and John McCain (R-Ariz.), Sen. Hollings is pushing to increase Corporate Average Fuel Economy (CAFE) standards to force automakers to produce lighter, less-safe, but more fuel-efficient vehicles. Some see an increase in CAFE, which is already responsible for between 1,300 and 2,600 deaths a year in the form of lighter, less crash-durable vehicles as an obvious barb to the powerful environmental lobby. In this instance, it seems that Sen. Hollings believes that “the public interest” necessitates laws to prevent the public from purchasing autos of their own choosing.

    Hollings’ “public interest” leanings are so interventionist that he is even working to block an antitrust reorganization between the Federal Trade Commission (FTC) and Department of Justice (DoJ) because he believes the new streamlined arrangement would not be hard enough on shareholders seeking to exchange their property as they see fit.

    Hollings earned a reputation as a fiscal conservative by balancing South Carolina’s budget for the first time since 1895 as governor and passing Gramm-Rudman-Hollings to shrink the budget deficit in the mid-1980s as Senator. But, in the short run, balanced budgets can be the product of increased taxes as easily as spending restraint, so the “fiscal conservative” moniker does not mean all that much, particularly given Sen. Hollings’ vote against the Bush tax cut in 2001.

    Sen. Hollings’ policy positions, general incivility, and public denunciation of a well-respected Chairman have made him enemy number one of those Americans who believe that government has grown too big and is involved in far too many private decisions. It may be a long time before people realize that “the public interest” is nothing more than a façade for intervention on behalf of well-organized private interests, but when uttered by Chairman Fritz Hollings, the meaning of the phrase should be clear to all.