Acton Institute Powerblog

DNC makes the case for deregulation and lower taxes

The 2020 Democratic National Convention’s only viral moment to date accomplished something rare in any political season: It taught sound economic policy. The image of a masked Rhode Island delegate holding a platter of calamari during Tuesday night’s state roll call overshadowed the fact that he promoted the state’s official appetizer while praising deregulation. Further research shows the importance of reducing trade barriers and that high taxes destroy wealth.

“Our restaurant and fishing trade have been decimated by this pandemic,” said State Rep. Joseph McNamara, who is also state party chairman. Restaurants have struggled to adapt their business model, declining tourism has reduced demand, and fish prices have plunged by a dollar a pound.

But state citizens “are fortunate to have a governor, Gina Raimondo, whose program lets our fisherman promote their catches on to the general public. And our state appetizer, calamari, is offered in all 50 states.” He dubbed Rhode Island “the calamari comeback state” before casting most of his delegation’s votes for Joe Biden.

Gov. Raimondo temporarily suspended a regulation that bars fishermen from selling their catch directly to the public. Fishermen could already sell to private buyers, but the program lets them sell directly to retailers like local restaurants. Raimondo created an exceedingly narrow program that grants fishermen a temporary license – which is set to expire by August 29.

But there are conditions: They can only sell their fish the same day they caught it, in the same port where they caught it, on the same boat on which it was caught, and the fish must be sold whole instead of in filets.

It seems perplexing that such restrictions existed in the first place – much less that the government only suspended them for 120 days. Much as California politicians have tried to end the nightmare of being your own boss, Rhode Island politicos tried to protect their residents from the horrors of buying same-day fresh seafood. Raimondo deserves credit for repealing yet another never-needed regulation exposed by the crushing weight of the COVID-19 outbreak.

Even such constricted deregulation has put money into the hands of the state’s ailing fishing industry. As of late last month, 15 fishermen had used the app to make $40,000 in sales. The bad news is, more than 160 people applied for the license.

The problem is the law of diminishing returns. The Providence Journal reports:

It’s opened a new market for [Newport fisherman Jon] Kourtesis, but it comes with a catch. He said he’s working 15- to 16-hour days to make “a few hundred extra bucks.”

“It’s like three jobs for me,” he said. …

Kourtesis believes some of his fellow fishermen were frustrated by regulations and decided against pursuing the dockside sales. The dockside sales also require extra effort on the fishermen’s part to get the word out to potential customers, among other tasks. It’s like running a fish market.

The customers “love being able to buy fish at a reduced price, not market price, and to get the off-the-boat prices,” said University of Rhode Island fisheries scientist Mitch Hatzipetro. But it’s no solution to the fishers’ “problem” of abundance.

Since the governor’s order keeps him bound to just one port, said Kourtesis, “I need people who are willing to buy 50 to 100 pounds” of fish a day. Fishing operations in small towns say the dockside’s limited sales are not worth the endless work hours. Kouretsis said he could make ends meet if he could sail to neighboring cities. But private dock sales are not “going to take care of all of the volume that we land,” said industry expert Patrice McCarron.

This tells us that regulations and other barriers to trade hurt producers – which ultimately reduces the resources available to society. The Christian Science Monitor reports that seasoned fishermen are “torn between wanting to catch more and worrying about flooding the market by catching too much.”

The story underlines one additional economic truth: Increasing the number of hours people must work to turn a profit reduces how much work they are willing to perform. No amount of sales could convince Kourestis to work 17 hours; the toll is simply too great.

But this phenomenon is not restricted to physical exhaustion. People refuse to work when they no longer receive compensation that they deem worthy of their time. Confiscatory tax rates serve the same function. By robbing a worker of the fruits of his labor, which the Bible deems “his portion,” the government discourages people from working and producing. This, in turn, reduces society’s overall wealth. Economists have even quantified the impact of exorbitant taxation. “[A] one percentage-point increase in the top federal personal income tax rate is associated with a reduction of total taxable income by about 0.50 percent,” according to Canada’s Fraser Institute.

The most viral moment from the Democratic National Convention proves the importance of deregulation, expanded trade, and the Laffer Curve.

(Photo credit: Screenshot.)

Rev. Ben Johnson

Rev. Ben Johnson is Executive Editor of the Acton Institute's flagship journal Religion & Liberty and edits its transatlantic website.