Don’t Drink to This One: Republicans Seek to Privatize Alcohol Sales

In 2012, Virginia has a projected budget shortfall of $2.8 billion or 15.4 percent of the budget. In order fix the state's budget woes while realizing the potential of the free market, VA governor Bob McDonnell (of Confederate History Month-fame) is pushing SB 443 this fall which would privatize Virginia's state-owned liquor stores.

According to a Washington Post article, Virginia is one of 18 states that, after prohibition, took the sale of of alcohol into their own hands; now liquor is sold at government owned ABC stores (run by the Department of Alcoholic Beverage Control).There are two arguments for privatization. The first is that government will make a large, one-time profit from the sale of these stores, estimated at between $300 and $800 million which will go towards transportation and plugging the budget. The second reason is that competition between liquor stores will drive down prices and introduce better products.

As always, there are big drawbacks to privatization. First, the amount of money the government will make off the sale is really hard to estimate. Second, it will mean the loss of funds every year after privatization. According to a Virginia paper, "The ABC contributed $322 million to Virginia's general fund last year and $1.5 billion over the past five years;" this means that the state would lose about that much every year. To make up some of the lost revenue, McDonnell wants to tax the alcohol being sold, to the tune of $150 million per year, but many a tax would bring in that much (N.B. a Republican is proposing a tax here).

Simply put, you basically have a Republican proposal, based on free markets, which will cost the state billions in the long term. it's a familiar pattern: Republicans deregulate, cause the state to lose revenue, and put the next Democratic administration in a position where they have to raise taxes or cut services to make up for it. One of the reasons the Great Recession will last a long time is because of the budget crisis in almost all the states (and several others are also considering privatization). Unless these proposals include a better mechanism for recuperating costs down the road, these plans will increase budget shortfalls, exacerbate the Recession, and of course, hurt the people who depend on government spending the most.

Pema Levy is a staff writer for Campus Progress.