Some state GOP leaders spurn free market on gas prices

"That logic has libertarians fuming. One of them, Tampa defense lawyer Rex Curry, has started a legal defense fund to help those the state sues......"

By S.V. Date
Palm Beach Post Staff Writer
http://www.palmbeachpost.com/politics/content/state/epaper/2005/09/14/m1a_gopgas_0914.html

Wednesday, September 14, 2005

TALLAHASSEE — Three of Florida's top Republicans, all conservative supporters of profit motive and the free market, have found a market they agree needs state intervention: gasoline prices during hurricanes.

Gov. Jeb Bush said recently that a service station should not raise the price of gas it had bought at a significantly lower price. An appropriate profit per gallon would be "2 or 3 cents," a profit margin that works out to about 1 percent, he said.

Agriculture Commissioner Charles Bronson is encouraging Floridians to use his toll-free hot line to report high gas prices, and Attorney General Charlie Crist last week sued a Tallahassee station owner for raising prices 70 cents a gallon in a single day.

The positions puzzle free-market economists, including one on Bush's Council of Economic Advisors.

Randall Holcombe, a Florida State University economics professor whose views often are cited by Bush's conservative allies in the legislature, said rising prices create the "most rational" means of rationing a scarce commodity. The alternative was to invite shortages by encouraging people who do not really need it to continue buying lower-priced gasoline, he said.

"I don't think it should be against the law to price-gouge," he said.

Holcombe said he did not know why Bush, who has used the free market as a model for everything from school vouchers to Medicaid reform, felt the need to intervene when it comes to motor fuel.

"That's a great question," Holcombe said. "Obviously, there may be some political benefit."

On Aug. 24, Bush declared a 60-day state of emergency because of Hurricane Katrina's impending landfall in South Florida. The executive order activates a state law that makes price-gouging illegal. It defines the practice as "unconscionable" price increases for lodging and essential commodities.

The hurricane left nearly a million residents of Miami-Dade and Broward counties without power for several days and hit the western Panhandle with 65-mph winds. But it did not damage ports, roads or other parts of the state's fuel distribution infrastructure.

So how did Katrina's landfall in Louisiana create an emergency in Florida that requires state intervention in gasoline pricing?

"I would consider it price-gouging even if it's in Alaska," Bush said. "It's price-gouging if you are raising your price... irrespective of cost, beyond a certain threshold.

"The same commodity, if you buy it at X and you sell it at Y for a profit, that's great. But then (if) you take advantage of the situation and raise prices even more, I think that's price-gouging, irrespective of whether it's in a hurricane-impacted area or in an area that hasn't been hit by the storm."

Crist, who is running for governor, denied any political motive in pursuing the price-gouging lawsuit. There is a distinction between the everyday principles of the free market, in which businesses can charge whatever the market will bear, and price increases during times of emergency, he said.

If there were a "gross disparity" between prices before and during the emergency, Crist said, "then the odds are it's price-gouging."

Crist said the statute applies equally to a poor hurricane victim fleeing a storm and a wealthy mom nowhere near a storm who is filling up her Hummer to drive her children to soccer practice.

"My job is to enforce the laws of the state of Florida," he said.

Agriculture spokesman Terence McElroy said Bronson saw no conflict between his support of the free market and his desire to protect consumers. "He is a free-market person, as I think most Americans are," McElroy said. "The one exception is for basic, essential commodities during an emergency."

Bush agreed. "We're in an emergency situation in our state. That's the difference.... If you change your prices three times in a day, or two times in a day, and it's the same gas that you had in your tank, there is no justification for that."

That logic has libertarians fuming. One of them, Tampa defense lawyer Rex Curry, has started a legal defense fund to help those the state sues and who face fines of $1,000 per incident.

"That's the gouging right there," he said.

Curry ridiculed the idea that the state should decide an appropriate profit level for a commodity such as gasoline. "This thinking has already been applied in places like the Union of Soviet Socialist Republics and the People's Republic of China," Curry said.

He said he would like to see how Bush's real-estate deals from before he was elected governor would compare with Bush's 2- to 3-cents-a-gallon profit. "How would Jeb even have made any money at all?" Curry said.

Democrats, meanwhile, have called on Bush to schedule a special session to suspend gasoline taxes temporarily to ease the pain for Floridians. State Sen. Ron Klein, D-Delray Beach, a candidate for Congress, said Florida's emphasis on pursuing gasoline retailers is misplaced.

"It's not just a hurricane. It's the demand for gas in China," Klein said, adding that the federal government should be investigating the major oil companies. "We're paying $3 a gallon, and the oil companies are making historic profits every quarter."

Bush said he is considering a suspension of the state gas tax in a special session this fall. His economic advisers were asked for their opinions this week.

Holcombe, for one, already knows his answer: "I don't think we should touch the gas tax."